A federal judge in the Eastern District of Texas granted an injunction that prohibits new Department of Labor (DOL) rules on overtime from taking effect nationwide. These rules, set to go into effect on Dec. 1, 2016, would have raised the salary threshold for exempting executive, administrative, and professional employees from overtime rules under the Fair Labor Standards Act (FLSA).
Under the FLSA, if an executive, administrative, or professional employee is paid at or above the salary threshold, then employers do not have to pay them overtime when they work more than forty hours in a week. The current threshold for overtime exemption in these white collar jobs is $455/week (or $23,660/year). Under the new DOL rule, on December 1, the new threshold would have doubled to $913/week (or $47,476/year), as well as increased every three years. This increase meant employers either had to raise salaries to keep workers exempt, switch those workers from salary to hourly, or keep them salaried but track time and pay time and a half for hours over forty worked in a work week.
Two lawsuits were filed on Sept. 20, 2016, in the United States District Court for the Eastern District of Texas, one by 21 states and one by more than 50 business groups. Both lawsuits challenged the ability of the DOL to create these new rules and focused on the increased costs the changes would bring to both state and local governments and businesses. To prepare for the new rule, businesses worked to implement changes so that they would be in compliance on December 1.
On Nov. 22, 2016, Judge Amos Mazzant issued an injunction in the consolidated cases, Nevada v. DOL, E.D. Tex., No. 4:16-cv-00731. The court’s Order states that the DOL did not have the authority to make the rule changes because the changes do not focus on the duties the workers perform, and instead create a de facto salary test. The Order further says that the DOL was not entitled to deference in their interpretation of the statute because the FLSA is not ambiguous, and to the extent that it is, the rule is still invalid because it is in contradiction to Congress’s intent to establish a duties test, rather than a salary test.
What will happen on appeal is uncertain. However, it is unlikely that the rule will be revived on appeal or otherwise reinstated by the new administration.
At this time, the takeaway for employers is that there will be no change to the overtime rules on Dec. 1, 2016.