New Overtime Rules – Halted for Now


Federal Court Temporarily Blocks New Overtime Rules

With just over a week to go before employers across the country implemented changes to comply with the Department of Labor’s Overtime Final Rule, a federal court in Texas has halted the implementation of the Rule.

In May 2016, the Department of Labor announced its Final Rule increasing the annual salary threshold for the “White Collar Exemptions” from $23,660 to $47,476.  This affected those employees who were exempt from the overtime requirements of the Fair Labor Standards Act because they were executive, administrative, or professional employees.  The new regulations were set to go into effect December 1, 2016, and were expected to affect more than 80,000 Hoosiers and more than 4 million Americans.  The rule was an effort by President Obama’s administration to boost pay for lower income workers.

On September 20, 2016, 21 states, including Indiana, filed a lawsuit challenging the new rules.  A collection of more than 50 business groups, led by the U.S. Chamber of Commerce, filed suit the same day.  The suits were filed in federal court in the Eastern District of Texas, and the separate lawsuits were eventually consolidated.  On October 12, 2016, the states moved for an emergency preliminary injunction, and the Court heard argument on November 16.  The states and businesses sought a court order preventing the Final Rule from going into effect on December 1.

On November 22, 2016, in a 20-page opinion by Judge Amos Mazzant, the Court granted the states’ Motion and enjoined the Department of Labor from implementing and enforcing the new regulations.  The Court’s order expressly applies on a nationwide basis.

With the preliminary injunction in place, the Eastern District of Texas will now determine on the merits whether the Department of Labor had the authority to make the Final Rule, and whether the Final Rule is valid.

Although the injunction is temporary, the opinion suggests the Final Rule may never go into effect in its current form.  In granting the temporary injunction, Judge Mazzant writes that the Final Rule is unlawful and, “the Department exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test. . . . If Congress intended [this], Congress, and not the Department, should make that change.”

If the Court ultimately strikes down the Rule, any appeal on behalf of the Department of Labor would be to the United States Court of Appeals for the Fifth Circuit, a generally conservative court.  In addition, Republicans control both houses in Congress, and President-Elect Donald Trump is set to take office in less than two months, further signaling the unlikely future of the Rule in its current form.

What this means for you – employers do not have to comply with the new regulations come December 1 but in coming months should continue to monitor the status.

See our previous blog post on this same law:  New Overtime Rules – Be in the Know.

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Contact us for advice and updated on the best way for your organization to comply with the new regulations.  We are also happy to speak with or present to any organization that wants to better understand its obligations.

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About the Author:

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Kate is an associate at Bunger & Robertson and focuses her practice on employment and health care related issues.  Bunger & Robertson is a full service law firm that has been serving Bloomington and Southern Indiana for nearly 70 years.

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