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White-collar overtime rule delayed: Injunction issued against updated rule

November 28, 2016 / 4 min read

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On November 22, 2016, federal district court Judge Amos L. Mazzant of the Eastern District of Texas issued a preliminary nationwide injunction stopping the Department of Labor (“DOL”) from implementing and enforcing the updated overtime rule, which was set to go into effect December 1, 2016.
The updated overtime rule would have required employers to provide overtime payment to any worker earning less than $913 a week, or $47,476 annually, regardless of job duties.
The injunction occurred as a result of 21 states filing an emergency motion in federal court to stop the updated overtime rule from going into effect. The states’ case was combined with another lawsuit filed by the Plano Chamber of Commerce and over 50 business organizations. The combined suit raised objections to the authority exercised by the DOL and claimed irreparable harm would occur if the rule went into effect. The court held 1) there was a substantial likelihood the states’ case would succeed on the merits, 2) the updated overtime rule created a substantial threat of irreparable harm if the injunction was not issued, 3) the harm in implementing the rule while the case is litigated outweighs the harm caused by delaying implementation, and 4) the public interest is not disserved by the injunction.
In support of its conclusion, the court said there was a substantial likelihood the DOL acted against the intent of Congress as it relates to the white-collar overtime exemption rules in that it “exceed[ed] its delegated authority and ignore[d] Congress’s intent by raising the minimum salary level such that it supplants the duties test” and created a “de facto salary-only test” as it would require overtime for many white-collar workers by ignoring duties all-together in several instances. The court said Congress did not intend for the salary level to categorically exclude an employee with white-collar duties from the exemption. In addition, the court also found there was a likelihood of success on the states’ claim that the DOL lacks the authority to implement an automatic updating provision for the salary level threshold every three years.
The injunction will preserve the existing rule while the court reviews the DOL’s authority to make such a rule as well as the validity of the rule. While the rule will not take effect December 1, 2016, it is possible it could be implemented after review. Further, the incoming administration and Congress have voiced opposition to the updated regulations so while the future of the updated overtime rule is unknown, it is more likely than not significant changes will occur.
At this point, there are several directions this can go, which leaves employers in a difficult position. An appeals court could overturn the injunction at any point (assuming the court’s decision is appealed), Congress could pass legislation nullifying the updated regulations, the incoming administration could make changes, the court could invalidate the regulations with a ruling on the merits, or the court could uphold the regulations. Given the uncertainty, the following are some considerations employers should take into account when assessing next steps and the possible implications:

If you have any questions, please contact a member of Plante Moran's Employee Benefits Consulting team. 

Update: On December 1, 2016, the Department of Labor filed an appeal with the U.S. District Court for the Eastern District of Texas, appealing the preliminary injunction issued last week by Judge Amos Mazzant.
The effect of the appeal is unknown at this time. Stay tuned for further updates. 

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