With less than ten days before the December 1, 2016, effective date of the Department of Labor's new rule raising the minimum salary threshold under the FLSA's "white collar" exemptions to $47,476 per year, a Texas federal court has issued a nationwide preliminary injunction blocking implementation of the new rule. The Texas case was filed on September 20, 2016, by 21 states as well as dozens of business groups who argued that the DOL rule improperly increases the salary level without proper regard for the job duties performed by employees. Click here to learn more on the DOL Overtime Rule. In a surprise decision issued on November 22, 2016, the Texas judge assigned to the case held that the states were able to show a likelihood of success in their challenge of the rule as well as irreparable harm if it went into effect, while the DOL failed to show it would be harmed if the rule was delayed.
While most observers did not expect a nationwide injunction to be issued, the question on employers' minds is what to do next? Many employers have already taken significant steps to prepare for and comply with the new rule and have already communicated to employees that some would receive raises, while others would become overtime eligible. For those employers, the changes may be difficult to undo as a practical matter. For employers who have not yet communicated or implemented changes, the decision may provide some relief. However, it is almost certain that the decision will be appealed to the Fifth Circuit Court of Appeals and if reversed, it is possible that an employer could be liable for the period between the original December 1 effective date and the date of an appellate reversal. Indeed, the courts are currently split on the issue of an employer's liability during such a period in another case involving a challenge to a DOL regulation that was invalidated by a district court and later reversed on appeal.
In addition to the battle over the new overtime rule being waged in the courts, the election results may provide another avenue of challenge to the rule. Previously, several bills in Congress were introduced to block, delay or revise the proposed changes, but they failed to pass and would have faced certain veto under the Obama administration. Now that the Republicans control both houses of Congress, such bills may be reintroduced and, if passed, may fare better under a Trump administration. Alternatively, the Trump administration could direct the DOL to drop the appeal (if it is still pending) and/or take the position that it is not going to enforce the new rule and take steps to revise or rescind it altogether. Although nothing is certain at this point, given that the implementation of the rule has been delayed by the Texas court's ruling, there is probably a greater likelihood that Congress and/or the new administration will take action to address the rule before it ultimately goes into effect.