A Texas federal court judge has issued a preliminary nationwide injunction blocking the U.S. Department of Labor (DOL) from implementing the controversial overtime rule set to take effect December 1. The rule would have more than doubled the weekly salary threshold for the federal Fair Labor Standards Act’s so-called “white collar” exemptions, from $455/week to $913/week.
The decision stems from a lawsuit filed earlier this year by 21 states, arguing that the DOL overstepped its authority when drafting the overtime rule by focusing on employees’ compensation rather than the work they perform. The Court noted that the increased wage levels could impermissibly supersede Congress’s intent to focus on the nature of the duties employees perform in determining whether they are exempt from overtime payment requirements.
The Court also questioned the indexing mechanism in the new overtime rule — which would have automatically increased the salary threshold every three years. This automatic increase fails to consider current economic conditions or the effect on resources. It also contravenes the statutory language and legislative history suggesting that lawmakers never contemplated such increases. Specifically, the judge wrote that the “state plaintiffs have established a prima facie case that the Department’s salary level under the final rule and the automatic updating mechanism are without statutory authority.”
Employers prepared for the December 1 effective date once again face uncertainty. While the preliminary injunction is a strong signal that the Court will permanently halt enforcement of the changes, that result is far from certain. Further clouding the situation, there are indications that the incoming Trump administration would overturn the overtime rule in the first quarter of 2017.
Employers must now decide whether to undo their recent changes in their compensation scheme, delay anticipated changes, or proceed as planned. Employers must also once again consider individual states’ laws, such as New York, that set higher “white collar” salary thresholds than $455/week. Given that the case against the DOL’s overtime rule is likely far from over, employers should consult with counsel immediately about next steps and strategy.