New FLSA Overtime Rules Enjoined By Federal Court

In an unexpected development, and just a few days prior to the implementation deadline, a Federal Judge has issued a “nationwide injunction” on the Department of Labor’s Final Rule to revise 29 C.F.R. Part 541 (“Final Rule”), regarding the executive, administrative, and professional (EAP) exemptions under the Fair Labor Standards Act (FLSA). The DOL’s Final Rule was issued on May 23, 2016 and was to go into effect December 1, 2016. The Final Rule, as issued, increases the minimum salary level of exempt employees under the FLSA from $455/week ($23,660/year) to $913/week ($47,476/year). However, with the issuance of the Memorandum Opinion and Order (in State of Nevada v. US Department of Labor November 22, 2016), the Final Rule will not go into effect at least until further action. A copy of the district court’s decision can be found here:

Judge Amos L. Mazzant, III determined that the DOL’s salary level requirement in the Final Rule is “directly in conflict with Congress’s intent” that the exemptions be based on employees’ duties rather than salary. The court found that, in issuing the Final Rule, the DOL exceeded its authority and ignored Congress’s intent by raising the minimum salary level by so much (more than doubling) that it effectively supplanted the duties test. The court noted that, “If Congress intended the salary requirement to supplant the duties test, then Congress, and not the Department [of Labor], should make that change.” The Court concluded that, due to the scope of the alleged irreparable injury to employers, the Injunction against the Final Rule should extend “nationwide.”

Employers should note that the court issued a “Preliminary Injunction”. The Injunction is only temporary, and there will be developments in the near future concerning the Injunction, which may be subject to an immediate appeal to the Fifth Circuit Court of Appeals. At this time, we do not know whether the DOL intends to pursue an appeal, but any such process would take time. Even if no appeal is sought, the Injunction is subject to further hearings and decisions in the case pending before Judge Mazzant. In short, these issues may not be resolved until after January 20, 2017, when the Trump administration will begin. The Trump administration may decide to drop any legal appeal, and the incoming Congress might seek to pass quick legislation on the issue.

Many employers now find themselves in a legal grey area. For now, employers who have not implemented the Final Rule are not required to do so. If they have announced forthcoming changes, they could let employees know that they are on hold pending further developments from the courts and elected officials. Of course, there are employers who have already implemented the Final Rule, and undoing these changes now could affect employee morale. Each employer will have unique circumstances and thus, in determining whether to continue with the changes pursuant to the Final Rule or to “un-do” those changes in light of the Injunction, employers may consult with their Wimberly Lawson attorney. Please watch for updates from our Firm as this matter develops further.