DOL’s Final Rule Blocked

On November 22, 2016, a federal district judge in Texas issued a nationwide preliminary injunction preventing the U.S. Department of Labor (“DOL”) from implementing and enforcing its final rule establishing new salary thresholds for millions of traditionally exempt white collar employees. As we reported in July, that new rule, which was to be effective on December 1, would have more than doubled the minimum salary for professional, executive and administrative employees from $23,660 annually to $47,476 annually. In addition, the new rule would have required adjustments to those salaries every three years beginning on January 1, 2020. Interestingly, the judge, Amos L. Mazzant III, was appointed by President Barack Obama.

Judge Mazzant’s ruling, although not a final decision, reflects his belief that the plaintiffs (a group of 21 states) are likely to succeed on the merits of their challenge to the DOL rule. This is because, the judge wrote, the DOL lacked congressional authority to effectively supplant a salary requirement with the executive, administrative and professional duties that make an employee exempt from overtime requirements.

The next decision in this litigation is uncertain, but the DOL’s prospects for success in front of the Texas court are clearly in doubt. It is unclear what actions, if any, the Trump administration will take next year.

Practical Takeaways

Employers who have already announced or implemented changes based on the DOL’s final rule may, depending on the circumstances, now alter their plans. Employers who have made no changes to their employees’ pay or exempt status are free for the moment to ignore the final rule. Either way, if either Judge Mazzant changes course or an appellate court reverses the preliminary injunction, employers will need to determine at that time how such a decision may impact their payroll and employee status. Employers should keep watch for the court’s final ruling in the litigation and any congressional action.