District Court Grants Injunctive Relief Blocking December 1 Implementation of New DOL Overtime Rule

Mark Blondman, Jason E. Reisman, and Joel Michel

Yesterday, Judge Mazzant of the United States District Court for the Eastern District of Texas granted a nationwide preliminary injunction blocking the Department of Labor’s (“DOL”) new regulation governing the Fair Labor Standards Act (“FLSA”) white collar exemptions. The rule, which would have more than doubled the minimum salary threshold for the white collar exemption from $455 per week (or $23,660 per year) to $913 per week (or $47,476 per year), was scheduled to become effective December 1, 2016.

Background and Analysis

In October, 21 states filed an emergency motion for a preliminary injunction to prevent the implementation of the new regulation. The states argued that the DOL exceeded its authority by making the salary threshold too high and by providing for automatic adjustments to the threshold every three years. Last month, the states’ case was consolidated with another lawsuit filed by the U.S. Chamber of Commerce and other business organizations, which raised similar objections to the rule.

In granting the states’ request for an injunction, the court explained that the purpose of the FLSA white collar exemptions was to exempt from overtime employees who are engaged in particular duties—namely executive, administrative, and professional duties. The court concluded that Congress had defined the white collar exemptions by focusing on an employee’s duties, which does not include a minimum salary level. Specifically, the court held that the “salary level was purposefully set low to screen out the obviously nonexempt employees, making an analysis of duties in such cases unnecessary.” As a result, the court held that the DOL exceeded its authority by raising the minimum salary level such that it overrides the duties test for the white collar exemptions.

What’s Next?

For now, the new overtime regulation will not take effect as planned on December 1, 2016. However, it is difficult to predict the regulation’s ultimate fate. As Judge Mazzant explained, “a preliminary injunction preserves the status quo while the court determines the Department’s authority to make the Final Rule as well as the Final Rule’s validity.” While the court’s decision does provide temporary relief, the court has yet to rule on the business parties’ motion for summary judgment, which seeks to permanently throw out the new regulation.

The uncertainty surrounding the new regulation poses a challenge to employers’ compliance efforts. Employers who have already made or announced changes to conform to the new regulations should consult with counsel to discuss the best course of action. How to proceed will depend on a number of factors, including what communications have already been made to employees, what changes have been implemented, and how quickly an employer can respond to new salary rules.

Employers should understand that the injunction does not affect their obligation to comply with existing FLSA regulations. In addition, nothing in the court’s injunction affects state laws. Therefore, employers operating in states that have their own regulations and laws must continue to comply with their states’ laws.

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