FEDERAL COURT BLOCKS NEW OVERTIME RULE

Dec 22, 2016

As we informed readers in a previous post on the Lynch Dallas, P.C. blog, “on May 18, 2016, the Department of Labor (“DOL”) issued final rules relating to the Fair Labor Standards Act (“FLSA”) that updated the minimum salary amount that is required for an employee to be considered “exempt” under the FLSA. Under the final rules, the DOL increased the minimum salary amount for employees performing certain duties to be considered exempt from $455 per week ($23,660 per year) to $913 per week ($47,476 per year).” (For a link to the full text of our previous blog entry regarding the passage of the rule in May of 2016, please click here.)

However, in September, over 20 individual states sued the Department of Labor asking the judge to grant a nationwide injunction, which would prevent the rule from taking effect in December as initially planned. This suit was filed in the United States District Court for the Eastern District of Texas under the caption “State of Nevada, et al v. United States Department of Labor, et al.”

On November 22, 2016, the Court issued its ruling, thereby blocking the Department of Labor’s (“DOL”) new overtime minimum pay rule from taking effect. The Court granted a nationwide preliminary injunction saying the DOL rule exceeds the authority delegated to it by Congress. This decision has a profound impact on employers and employees alike who had been preparing for months for increased salaries and overtime pay on the employee side and increased costs and potential downsizing on the employer side. For the full text of the Court’s ruling blocking the overtime rule change, please click here.

In this case, the Plaintiffs were opposing the new DOL rule and argued that “it would increase compliance costs for employers who would have to track hours more meticulously and would force companies to cut employees' base pay to compensate for overtime costs that kick in more frequently.” On the other side, the Defendants and other proponents of the rule change argue that it will improve the livelihoods of millions of Americans who work well more than 40 hours each week while not getting paid for that extra time. Supporters of the rule also suggest that some full-time salaried workers are currently making close to or less than the minimum wage when all of their overtime hours are included in wage calculations. In its ruling, the Court agreed with the Plaintiffs’ arguments and held that the new rule would cause irreparable harm to the Plaintiffs and employers nationwide if not blocked from taking effect in December.

Because of this ruling, the current and future status of the new rule and all of its changes are open to speculation. Many pundits have suggested that this ruling marks the end of the proposed changes entirely. With a conservative President and presumably conservative judges to be appointed to the Supreme Court and federal Circuit Courts of Appeals, any challenge of the ruling by the Department of Labor would likely result in an unfavorable ruling by a conservative, and presumably management-friendly, Supreme Court. Other media voices have suggested that the rule’s changes may not be completely dead given that Congress could amend the labor laws to institute the changes. It is also possible that the Trump administration could propose and pass its own rule changes, which, if done, would likely be somewhere between the status quo and the income levels set by the initial DOL rule in May.

If you have questions regarding the change to the minimum salary amount, the federal court ruling blocking the new rule from taking effect, or the Fair Labor Standards Act generally, please contact Gregory T. Usher at Lynch Dallas, P.C. at gusher@lynchdallas.com or 319-365-9101.



Category: Employment Law

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