In a surprise decision handed down late on November 22, 2016, U.S. District Court judge Amos Mazzant halted the new overtime regulations that were set to take effect on December 1, 2016. The Court’s order held that the Department of Labor’s (“DOL”) final rule, which dramatically expanded eligibility for overtime pay, was beyond the agency’s authority under the Fair Labor Standards Act (“FLSA”).
As many employers are aware, the DOL had announced changes to FLSA exemptions that would have drastically changed the way many employees are compensated. These changes included: (1) raising the minimum salary levels for the FLSA’s executive, administrative, and professional employee exemptions (the so-called “white-collar exemptions”) from $455 per week ($23,660 per year) to $913 per week ($47,476 per year); (2) raising the threshold for the “highly compensated” employee exemption from $100,000 per year to $134,004 per year; (3) implementing automatic increases to each minimum salary level every three years; and (4) allowing employers to credit non-discretionary bonuses and incentive payments (such as commissions) towards the minimum salary level.
On September 20, 2016, several business groups and 21 states sued the DOL to stop these changes and asked Judge Mazzant to enjoin the new rule from taking effect. Now, given the Plaintiffs’ success, these changes will no longer take effect on December 1st. Significantly, it is now also possible that these changes will never go into effect – at least not in their current form – with the incoming Republican administration and Republican-controlled Congress that will convene in January 2017. At this point, it is too early to tell.
Judge Mazzant’s injunction will undoubtedly cause headaches for many employers who have already taken significant action to implement changes to their policies, procedures, and payroll systems. Some may choose to stay the course and implement changes notwithstanding the Court’s ruling. However, the good news is that employers are no longer under any time table to go-live with changes they anticipated making in response to the overtime rule and are now free to make additional plans that will best serve their businesses.
From December 1st onward, employers should continue to stay tuned. The Court’s injunction is preliminary at this time, and the DOL is expected to continue litigating the issue. It is doubtful, however, that Judge Mazzant will change his view, and an appellate court will likely weigh in next year.