On Tuesday, November 22, 2016, the United States District Court for the Eastern District of Texas enjoined the Department of Labor’s implementation of its new overtime rule that was slated to take effect on December 1, 2016. The new rule would have raised the salary requirement for employees who are classified as exempt under certain “white collar” exemptions to $47,476 per year, up from $23,660 per year. Reasoning that Congress intended exemptions from overtime laws to depend on an employee’s job duties and not the employee’s salary, the Court held that the Department exceeded its authority by imposing a salary increase that effectively would “supplant” the job duties test. The Court noted that the rule’s salary increase was so great—reaching approximately 4.2 million previously exempt workers—that it essentially created a “de facto salary-only test,” dwarfing the importance of the exempt employee’s job functions. The injunction extends nationwide and presently bars the Department of Labor from implementing and enforcing the new overtime regulations pending further order of the Court.
It is important to note that the Court’s injunction is a preliminary ruling, and not a final ruling. The Department of Labor now may attempt to expedite further proceedings to either lift the preliminary injunction or take an appeal to the Fifth Circuit Court of Appeals. Practically, whether the Department of Labor can expedite further proceedings before January 20, 2017 is critical, as the new administration under President-elect Trump has been given a much easier political path to effectively end the new rule by choosing not to challenge the current ruling instead of having to pull the new rule back after raises have already gone into effect. Therefore, whether the Department of Labor can obtain an expedited hearing on the current injunction or an expedited appeal before January 20, 2017, is critical to whether the new rule has any viable path to implementation. For now, however, the new rule has been blocked and employers have no present obligation to comply as of December 1, 2016. For more information, please contact Henry Perlowski or Jennifer Shelfer.
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