Extra, extra! Just when employers thought they had all of their ducks in a row to comply with the FLSA overtime changes and head out the door for Thanksgiving, a federal judge in Texas issued a game changer . . . a temporary injunction stopping the implementation of the regulation changes to which employers were required to comply by December 1, 2016, i.e. one week from Thanksgiving.
As a recap, in May of 2016, the DOL published new regulations that raised the minimum salary level needed to qualify for a white collar exemption from the overtime compensation requirements of the FLSA from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). Over the summer and with an uncertain political climate, prudent employers took initial steps to analyze the effects of the change on their business and put plans of execution in place. Then, in September of 2016, two lawsuits were filed, one on behalf of 21 states, the other by the U.S. Chamber of Commerce, challenging the regulation change and arguing that the DOL exceeded its authority in establishing the revised regulations. These two lawsuits were consolidated in October of 2016 and the parties began argument regarding the preliminary injunction requested by the plaintiffs. Following unsuccessful attempts to legislatively alter the rule, many, myself included, doubted that the litigation, which was assigned to Judge Amos Mazzant, a President Obama appointee, would impact the upcoming deadline. The more likely result was an enjoinment of the 3 year automatic update.
And yet, this evening, with only one week to go, the DOL’s regulations are officially on pause. In issuing the injunction, the Court explained, “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 Rules as well as the Final Rule’s validity.”
What does this mean for employers? The immediate result – the Dec. 1st deadline is a thing of the past. Employers are not required to comply with the new regulations, i.e., raise salaries for white collar exempt employees to maintain the exemption, by Dec. 1st. The long term result – the future of the overtime rule is certainly in doubt. Keep in mind that the injunction is temporary – it only delays the effective date of the new regulation until the Court makes a final determination on the merits of the case. However, to succeed on the preliminary injunction, the plaintiffs had to prove a “likelihood of success on the merits.” The Court found that this burden was met, noting “Congress did not intend salary to categorically exclude an employee with [white collar] duties from the exemption.” If the injunction remains intact until President-elect Trump takes office, there is a good chance that it will see significant modification and amendment. Had the injunction not been imposed and the final rule implemented, a new administration would have needed a new rule to modify or reverse the changes. In other words, stay tuned . . .
In the meantime, if you have any questions on how to respond to this change in your workplace, please don’t hesitate to contact me.