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Preliminary Injunction Halts Implementation of New FLSA Overtime Rules

As Published in the January, 2017 Issue of the PELRAS Newsletter

Published on: Fri 3rd Feb, 2017 By: Brad Betack

Just days prior to its implementation, a federal judge granted a preliminary injunction, stopping enactment of the Department of Labor’s new overtime rules, which would have increased the salary threshold for employees under the Fair Labor Standards Act, potentially making millions of employees eligible for overtime compensation.

The rules, which increased the overtime FLSA salary threshold for employees to qualify for many of the white collar exemptions (bona fide executive, administrative or professional exemptions) were set to be implemented on December 1.  The new rules would have raised the minimum weekly salary threshold for exempt white collar employees from $455 ($23,660 on an annual basis) to $921 ($47,892 on an annual basis).  In addition, the rules called for automatic increases to the minimum threshold every three years.

Twenty-one states filed an emergency motion in the Eastern District of Texas for a preliminary injunction to stop the implementation of the rules.  Specifically, the states argued that the increase in the minimum salary threshold exceeded the Department of Labor’s authority, as the FLSA only describes exempt employees in terms of duties and not in terms of salary or compensation.  The District Court agreed, pointing to language used by Congress when enacting the white collar exemptions.  Specifically, the enabling legislation only referenced types of work to be conducted or a job’s duties regarding eligibility for overtime exemptions, and not a level of compensation.  The Court found the new salary thresholds exceeded the DOL’s authority, as it effectively took precedence over the duties test.  As a result, the Court issued the preliminary injunction, halting implementation of the rules.

The DOL has appealed the decision to the 5th Circuit Court of Appeals.  Regardless of the appeal, however, the preliminary injunction, coupled with the impending change in presidential administrations, leaves the future of the overtime rules in serious doubt.

While the DOL has filed a petition for an expedited briefing schedule in the appeal, it is unlikely that the court process will play itself out prior to the January 20, 2017 inauguration day.  While the Trump Administration has yet to take an official position on the issue, during the campaign, the President-Elect stated his intent to undo the rules and the Secretary of Labor has expressed his desire to overturn the new rules.

Once in office, President Trump could effectively kill the rules by instructing the DOL to stop the appeal efforts.  Further, if the rule survives the Court challenge, Republican lawmakers could overturn the rule through the little-known Congressional Review Act, which allows lawmakers to disapprove of regulations that were recently issued, effectively blocking implementation of the rules.

While the injunction, at the very least, temporarily delays the need for employers to review and re-classify employees in order to comply with the proposed overtime rules, employers will want to watch closely for developments in the 5th Circuit appeal and any actions taken by the Trump Administration regarding the proposed rules, beginning January 20, 2016.