District Court Judge Grants Injunction Putting DOL Overtime Rule on Hold

 

In late September 2016, twenty-one states led by Texas and Nevada, along with the U.S. Chamber
of Commerce and other business groups, challenged the U.S. Department of Labor’s (“DOL”) new
overtime exemption rule set to take effect on December 1, 2016, and sought a nationwide
injunction preventing the rule from taking effect.


The states argued that the DOL unconstitutionally overstepped its authority by establishing a
federal minimum salary level that more than doubled the minimum salary threshold required to
qualify for the Fair Labor Standards Act’s (“FLSA”) white collar exemption, and that the rule would
result in a substantial increase in employer operating costs. [1] In particular, the states took issue
with the policy behind the rule change, arguing that salary level alone does not reflect the type of
work an employee performs, and that the DOL’s regulation disregarded the text of the FLSA by
imposing a salary threshold without regard to whether an employee actually performs bona fide
executive, administrative or professional duties.


On Tuesday November 22, 2016, U.S. District Judge Amos Mazzant of the Eastern District of Texas
granted the states’ preliminary injunction, stopping (or at least delaying) the DOL from
implementing the rule that would have expanded overtime protections to more than 4 million
employees nationwide.


The preliminary injunction preserves the status quo of keeping the old rule in place, while the
court can now fully determine the final rule’s validity, as well as the DOL’s authority to promulgate
the final rule.


In granting the injunction, Judge Mazzant agreed with the states that they would suffer irreparable
harm due to the significant costs of complying with the rule. Judge Mazzant concluded that
although the DOL has “significant leeway” to establish the types of duties that could qualify an
employee for the white collar exemption, the DOL was not entitled to deference in creating the
new rule because Congress intended the exemption to apply based on the tasks the employee
actually performs, and not simply a minimum salary level. According to Judge Mazzant:
“Congress defined the [white collar] exemption with regard to duties, which does not include a
minimum salary level. With the final rule, the Department exceeds its delegated authority and
ignores Congress’s intent by raising the minimum salary level such that it supplants the duties
test.”

Although the injunction is only temporary, Judge Mazzant stated that the plaintiffs showed “a
likelihood of success on the merits.” According to Judge Mazza, “The state plaintiffs have
established a prima facie case that the Department’s salary level under the final rule and the
automatic updating mechanism are without statutory authority.” Thus his decision casts significant
doubt on the likelihood that the rule will be implemented as it is currently drafted. Following the
ruling, the Justice Department said in a written statement that it was “reviewing the court’s opinion
and order and considering any next steps.”


This ruling is a welcome sigh of relief for most employers. Indeed, because of this ruling, there
currently is no need for employers to reclassify employees based on the new $47,476 minimum
salary threshold, raise certain employees’ salaries over that threshold, switch employees to parttime
status, or take any other steps they may have been planning to take on December 1 to comply
with the new overtime rule. However, it is impossible to predict with certainty what will happen
going forward. It is possible that after a delay, (i) the rule will end up being implemented exactly as
it is drafted now; (ii) portions of the rule could be thrown out while other aspects of the rule remain
or in place; or (iii) the rule could be stricken in its entirety. As a result, employers cannot just
disregard the preparations they have made for the implementation of this new rule. Rather,
employers should continue to have plans in place so that they are fully prepared to comply with the
new rule if an appeal is successful, or if Judge Mazzant decides the case on the merits in favor of the
Department of Labor.


We will continue to keep you apprised of any developments in this important matter for your
business.


[1] The DOL estimated that the rule would cost the nation’s businesses approximately $300 million
per year.


For assistance with developing lawful policies and procedures regarding FLSA compliance or any
other labor and employment issues, contact Jordan Schwartz, Partner, Labor & Employment, Conn
Maciel Carey LLP.

 

Jordan B. Schwartz

Partner, Labor • Employment Practice Group

Washington, DC

202.909.2731

jschwartz@connmaciel.com

Last Updated November 23, 2016

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