On November 22, 2016, Federal Judge Amos L. Mazzant, III, of the Eastern District of Texas, issued a national preliminary injunction blocking the Final Rule of the United States Department of Labor (“DOL”), that had amended overtime pay regulations under the Fair Labor Standards Act of 1938 (“FLSA”), that were to have gone into effect on December 1, 2016. The Court’s Opinion is available here.
As previously reported by the McNair Law Firm on May 20, 2016, earlier in 2016, the DOL released its Final Rule raising the salary threshold level for employees employed as in a “bona fide executive, administrative, or professional capacity” to be exempt from overtime requirements of time-and-a-half for hours worked over forty hours per week. Last modified in 2004, the new Final Rule doubled the minimum salary level from $23,660.00 annually ($455/week) to $47,476.00 ($913/week). The DOL estimated that this change would entitle another 4.2 million workers not currently receiving overtime pay to new higher pay. The business community, however, sharply objected, and the proposed regulation received over 290,000 public comments.
Twenty one states filed suit in Federal Court to block the new Final Rule, and immediately moved for preliminary injunction, on the basis that the DOL exceeded the authority granted to it in the FLSA. Separate lawsuits filed by over fifty other business groups were consolidated. The Court received briefs from all sides and heard oral argument.
Judge Mazzant, appointed by President Obama, agreed that the DOL exceeded its authority, and that the new regulations were unconstitutional. The Court took particular issue that by doubling the minimum salary, in many cases, the DOL Final Rule was abandoning the “duties test” actually contained in the FLSA. The Court also found illegal the Final Rule’s requirement that the minimum salary automatically rise every three years indexed to inflation.
Where things stand now
Some forward thinking businesses already invested heavily in preparing to comply with the new Final Rule, changing job descriptions, moving workers from salary to hourly, and vice versa, in some cases raising salaries. Those businesses are unlikely to be able to undo those changes already made.
President-Elect Trump spoke against the Final Rule in his campaign, but it was unlikely, absent this injunction, it could be quickly or easily undone without either new legislation from Congress, or a lengthy public comment rule making period from the DOL, even if President Trump will be able to largely remake the senior DOL staff and administration to his liking. It was generally assumed that some legislative compromise would be coming, to lower the salary level of the exemption, but not to eliminate it completely, as business groups do not appear opposed. It remains to be seen whether the DOL will appeal this Preliminary Injunction, or if so, it would be reversed.