‘Unlawful’ overtime rule temporarily blocked

November 23, 2016 - by: Kate McGovern Tornone 0 COMMENTS

A federal district court temporarily blocked the U.S. Department of Labor’s (DOL) new overtime rule on November 22, just days before it was scheduled to take effect. The judge who issued the order called the regulation “unlawful” and said such actions should be left to Congress.

At the request of 21 states, the U.S. District Court for the Eastern District of Texas granted an emergency injunction halting the regulation, which would have required employers to pay overtime to employees earning less than $913 per week ($47,476 annually) beginning December 1.

Other DOL initiatives have suffered a similar fate in recent weeks. The same court temporarily halted the department’s “blacklisting” rule in October. And just days ago, another court in Texas issued a permanent injunction against the DOL’s “persuader” rule.

Emergency injunction granted

In the lawsuit, the plaintiffs alleged that the DOL overstepped its authority and requested an emergency injunction, arguing that the public interest necessitated a nationwide preliminary injunction.

Judge Amos Louis Mazzant, III, who was nominated to his position by President Barack Obama, agreed. He said it is clear that Congress intended the Fair Labor Standards Act’s (FLSA) white-collar exemptions to apply to employees doing actual executive, administrative, and professional duties—not just employees who meet a salary requirement.

“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. Consequently, the Final Rule . . . is unlawful,” Mazzant wrote. “If Congress intended the salary requirement to supplant the duties test, then Congress, and not the Department, should make that change.”

Because he determined that the final rule is unlawful, Mazzant said it was unnecessary to separately address the salary threshold’s automatic increases, which would have upped the threshold every three years. The threshold was expected to exceed $51,000 at the first update in 2020. “Because the Final Rule is unlawful, the Court concludes the Department also lacks the authority to implement the automatic updating mechanism,” Mazzant said.

Moreover, the public interest is best served by an injunction, Mazzant continued. If the rule is ultimately determined to be invalid, the injunction will prevent the public from being harmed by its enforcement. On the other hand, if the rule is deemed valid, the injunction will merely delay implementation, he said.

“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,” Mazzant wrote. “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.” State of Nevada v. United States Department of Labor, No. 4:16-cv-00731 (E.D. Texas, Nov. 22, 2016).

Reactions

The Society for Human Resource Management (SHRM) applauded the order. “This decision provides an important opportunity to revisit the rule and create one that better reflects the modern realities of today’s workplace and better meets the needs of both employers and employees,” SHRM said in a statement.

Senator Lamar Alexander (R-TN), who had introduced a bill that would have scaled back the rule, echoed that sentiment and said the delay will give the Trump administration time to revise the rule.

The DOL, however, strongly disagreed with the decision. “The department’s overtime rule is the result of a comprehensive, inclusive rulemaking process, and we remain confident in the legality of all aspects of the rule,” it said in a statement.

Employer plans

For now, the overtime rule is suspended. Unless a court takes further action during the next week, employers do not have to comply with the rule by December 1, according to Michelle Lee Flores, a member of Cozen O’Connor in Los Angeles and a contributor to California Employment Law Letter.

The DOL said it is currently considering its legal options, and Flores said it could be days or weeks before the court takes further action. It could, among other things, issue a permanent injunction.

If employers haven’t implemented any changes in anticipation of the rule, they’re safe to maintain the status quo for now, Flores said.

If employers have adopted changes, they’ll have to decide whether to roll them back. For example, if an employer gave modest salary bumps to employees close to the threshold, it may make sense to leave the bumps in place, especially because the injunction is only temporary. If the increase was substantial, the employer would have to weigh the risks of reducing employees’ salaries back to their original levels.

Employers must not, however, attempt to recoup extra compensation paid in anticipation of the rule. “You wouldn’t want to make employees pay anything back,” Flores explained. Salary reductions should be done with plenty of notice and explanation to employees, she said, and should be done going forward—never retroactively.

 

Need to learn more? Join us December 14 for the live webinar The Trump Presidency: What Will Survive—and What Won’t—from the Obama Regulatory Agenda. In addition to this injunction stopping the overtime rule,  a number of regulations are scheduled to go into effect in the next couple of months, so it’s very important for employers to know what they should expect to be enforced under President Trump.  During this in-depth webinar, featuring live Q&A, Washington insiders David Fortney and Nita Beecher of Fortney Scott will explain how employers can manage their regulatory requirements amid the transfer of presidential power. For more information, click here.

About Kate McGovern Tornone:
Kate Tornone is an editor at BLR. She has almost 10 years’ experience covering a variety of employment law topics. Before coming to BLR, she served as editor of Thompson Information Services’ ADA and FLSA publications, coauthored the Guide to the ADA Amendments Act, and published several special reports. She graduated from The Catholic University of America in Washington, D.C., with a bachelor of arts in media studies. Kate can be reached at ktornone@blr.com.
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