Key Notes:

  • Preliminary injunction issued November 22 blocking DOL’s overtime rule from going into effect December 1.
  • For the time being, employees can still be classified using current salary threshold and duties test.
  • Employers who already have implemented changes may want to reconsider those changes.

A federal judge in Texas has entered a nationwide preliminary injunction blocking the U.S. Department of Labor (DOL) from implementing and enforcing its changes to the Fair Labor Standards Act (FLSA) overtime regulations, which were to go into effect on December 1, 2016. The preliminary injunction may bring to a screeching halt employers’ compliance preparations that began this spring.

In May, the DOL issued new rules that would overhaul the FLSA white-collar exemption by raising the threshold at which salaried workers become exempt from overtime pay from $23,660 to $47,476. The new rules also establish an automatic update for the salary threshold every three years. An estimated 4.2 million more workers would be eligible for overtime under the new rule.

In response, 21 states and several business groups, led by the U.S. Chamber of Commerce, challenged the overtime rule, arguing that the DOL did not have authority to raise the salary-level threshold, that the degree of the increase violated the FLSA and that the automatic increase provision was unlawful.

On November 22, Judge Amos Mazzant granted the states’ request for an injunction, finding that the rule improperly created a de facto salary test for determining which workers fall under the white-collar exemptions.

The Texas court’s ruling will have an immediate impact on almost all employers. Unless there is further order from the court, the salary threshold for exempt employees will not change effective December 1. It appears that, for the time being, employees can continue to be classified using the current salary threshold of $23,660, in conjunction with the FLSA duties test. Given the current status of the rule, if you have not yet implemented planned changes to employee exempt status ahead of the December 1 effective date, you may continue to keep those changes on hold pending further court orders.

If you have already implemented pay or exemption status changes in anticipation of the December 1 effective date, you may reconsider whether those changes should be maintained. Although it may be difficult to undo pay increases already issued or publicized to employees in conjunction with the expected DOL changes, you may be able to avoid changing employee exemption status.