JUDGE STOPS FEDERAL OVERTIME RULE DAYS BEFORE DECEMBER 1, 2016 DEADLINE

Earlier this year, the Department of Labor issued its Federal Overtime Exemption Rule, “the Final Rule.” Starting December 1, 2016, this was to raise the minimum salary amounts for certain workers to qualify for overtime exemption under the Fair Labor Standards Act (FLSA). See New Stricter Federal Requirements on Exemptions from Overtime, Employers Must Comply No Later than December 1, 2016 (May, 2016).

Two lawsuits filed in the Eastern District of Texas – one by 21 states and the other by a business-interest group – sought to slow or stop implementation of the Final Rule. See Federal Increase Due December 1, 2016 To Qualified Exempt-from-Overtime Employees (October 2016) and Not So Fast – Congressmember Seeks to Slow New Overtime Exemption Rule (August, 2016).

On November 22, 2016, the federal judge presiding over these cases issued a nationwide injunction against enforcement of the Final Rule, giving businesses across the country a reprieve from the impending, December 1 implementation of the new salary threshold of $47,476 annually ($913/weekly or $3,957/monthly). See ,State of Nevada v. United States Department of Labor Case 4:16-Cv007 31-ALM. The court found that Congress controls the criteria for executive, administrative, or professional overtime exemption and that the FLSA “does not grant the Department of Labor authority to utilize a salary-level test or an automatic updating mechanism under the Final Rule.”

It is not currently known whether the Department of Labor will appeal this injunction to the federal Fifth Circuit Court of Appeals. However, as President-elect Trump has expressed opposition to the Final Rule and an intention to revoke it, any such appeal may be futile.

A business that has not yet implemented any actions under the Final Rule need not do so, at least for now. A company that has implemented new pay structures under the rule may consider undoing them but should likely do so only after consultation with qualified legal counsel.

For further information on the issues raised by these new regulations, please contact our attorneys, Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin
November 23, 2016