Employment Law Update

A federal district court in Texas issued a preliminary injunction on November 22, 2016, blocking implementation of the U.S. Department of Labor’s overtime rule, which was set to take effect on December 1^st.  The DOL’s new rule raises the current minimum salary level for exempt executive, administrative and professional employees from $455 per week ($23,660 annually) to $913 per week ($47,476 annually).  Additionally, under current regulations, employees making more than $100,000 annually who perform limited exempt white collar duties are exempt from the requirement of overtime pay.  Under the new rule, such highly compensated workers only qualify for the exemption if they are paid a salary equal to or greater than $134,004.  (The DOL’s new overtime rule is described in more detail in our prior Employment Law Update, DOL Issues Final Overtime Rules, May 2016).

Twenty-one states filed suit against the DOL’s new overtime rule.  The suit was consolidated with a lawsuit filed by the U.S. Chamber of Commerce and other business organizations.  Yesterday, Judge Amos Mazzant granted the request of the State plaintiffs for a preliminary injunction.  The court opinion states that Congress intended that the exemptions be primarily defined by reference to the type of duties performed by employees, not their salary level, and that the DOL exceeded its authority by more than doubling the minimum salary level.  The DOL’s significant increase to the salary level threshold “creates essentially a de facto salary-only test” that would have made 4.2 million additional workers eligible for overtime pay.  The court ruled that,

Plaintiffs have shown a likelihood of success on the merits and irreparable harm… Due to the approaching effective date of the Final Rule, the Court’s ability to render a meaningful decision on the merits is in jeopardy.  A preliminary injunction preserves the status quo while the Court determines the Department’s authority to make the Final Rule as well as the Final Rule’s validity.

What Comes Next?

The case may remain before Judge Mazzant, for a full decision on the merits.  The DOL may seek to immediately appeal the case to the Fifth Circuit Court of Appeals.

President Obama leaves office on January 20, 2017.  Before that date, it is possible that Judge Mazzant could issue a decision dissolving the injunction or the federal appeals court could hear an appeal and overrule (or affirm) the decision.  However, a final disposition is not likely to be reached before the change in administration.   It is not certain what the DOL under President Trump will do.  For example, it could decide not to defend the case, defer the effective date of the new overtime rule, and/or begin a new rule-making process which reaches different results.  In addition, a number of bills have been introduced in Congress seeking to delay and/or modify the new rule. It is possible that the issue will be resolved legislatively.

What Should Employers Do?

Some employers which have implemented or announced changes may decide it is better to retain such implemented changes or put the changes into effect on December 1^st as previously announced.  Other employers may decide to inform their employees that in light of the court’s last minute injunction, the employer has decided to maintain the present status and pay levels of employees until further developments by the courts, the DOL, and/or Congress.

If you want to discuss the impact of the court’s decision on your organization, please contact:

Chuck Bacharach
410-576-4169

Bob Kellner
410-576-4239