Posted November 23rd, 2016 in Top Stories, Legal Insights

DOL Overtime Rule Blocked by Federal Court

On Tuesday, November 22, a Texas federal district court judge entered a nationwide injunction blocking the U.S. Department of Labor from implementing a rule that would raise the salary threshold for the FLSA’s “white collar” exemptions.  This means that, unless there is an appeal and immediate ruling, the new salary threshold will not go into effect on December 1.

The court concluded that Congress gave the DOL the discretion to define the duties that qualify employees for the “white collar” exemptions, but not to increase the salaries for these exemptions to the level set in the new rule.  In short, the court found that the DOL didn’t have the power to increase the salary threshold as much as it did.

What is likely to happen next?

• The DOL under the current administration will almost certainly appeal this decision to the Fifth Circuit Court of Appeals.  The Fifth Circuit could stay the district court’s decision while it hears the appeal (essentially allowing the new rule to go into effect while the court adjudicates the appeal).  We think a stay is unlikely, especially because of the difficulties that could arise from forcing employers to comply with the new rule and then invalidating it.
• Whoever loses at the Fifth Circuit would have the option of seeking review from the U.S. Supreme Court, which is unlikely to hear the appeal until a new administration is in place.  Significantly, the DOL does not need to maintain its position from administration to administration (and there are indications that the new administration is opposed to the new rule).  In other words, the DOL under a new administration could decide to fight for the new regulations or abandon them.

What are an employer’s options?

• If your organization was set to increase the salaries of exempt employees or reclassify them to non-exempt status only because they did not meet the new salary threshold, you no longer need to do so at this time.
• In the process of coming into compliance with the new regulations, many of our clients found that certain exempt employees also did not meet the duties tests for the “white collar” exemptions.  The Texas court’s decision does not affect the duties tests.  If an exempt employee did not meet the duties test before this decision, s/he does not meet it now and should be reclassified.

The labor and employment team at NJL is monitoring these developments closely. To speak to someone about this issue, contact Veena Iyer at viyer@nilanjohnson.com or 612.305.7695.