Breaking News! The U.S. Department of Labor’s New Overtime Rules Will NOT Take Effect on December 1, 2016

IN BRIEF

A federal judge in Texas has issued an injunction against the implementation of the regulation that would have changed the salary threshold for exempt status under the FLSA. As employers who have spent months preparing for it know, the change was scheduled to go into effect on December 1, 2016. The injunction comes as a result of a lawsuit filed by 21 states and dozens of business groups arguing that the regulation, which would have doubled the salary threshold, is beyond the lawful authority of the U.S. Department of Labor. The injunction applies nationwide.

The Facts

U.S. District Judge Amos Mazzant said in his ruling that the DOL’s big increase in the salary threshold necessary to qualify for exempt status would have the effect of changing the statutory duties tests for exemption and therefore could be accomplished only by Congress, not the DOL. The injunction is not a final decision on the legality of the regulation; a hearing on the merits is scheduled later this month. However, from the language of the ruling on injunction it seems unlikely that Judge Mazzant would side with the government’s arguments that the regulation is within the DOL’s authority. 

What’s Next

For now the regulation is on hold, and it is hard to see a path forward for its implementation. The DOL may appeal Judge Mazzant’s decision to the conservative Fifth Circuit Court of Appeals, but the Trump administration could withdraw the appeal. It is unlikely that Congress would enact the regulation that the DOL put forth, and equally doubtful that the Trump administration would support a change that has a projected price tag of $650 million for business. In summary, for the foreseeable future the FLSA remains unchanged. 

Bottom Line

Employers should make no change in the salary, overtime treatment or exempt/hourly status of any employee at this point based on the salary regulation that had been slated for December 1. The salary threshold stays at $23,660 annually or $455 per week.

Caveat 

• If in the course of preparing for the new regulation you have found errors in classifying employees as exempt or hourly or problems with other pay practices under the current FLSA regulations, you should consult with counsel.

For more information contact Linda McGill or Glenn Israel or contact our Labor and Employment team.