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Entire DOL Overtime Rule Enjoined Nationwide

The U.S. Department of Labor’s Final Rule setting a new minimum salary threshold for employees to qualify for the Fair Labor Standards Act's (“FLSA”) “white collar” exemptions to overtime and minimum wage will not take effect as scheduled on December 1, 2016. On November 22, 2016, U.S. District Court Judge Amos L. Mazzant, III from the Eastern District of Texas issued a preliminary injunction blocking implementation of the DOL’s new regulations nationwide. The Memorandum and Order was issued in a case filed by a coalition of 21 states, which challenged the authority of the DOL to promulgate its regulations.

The Memorandum and Order can be viewed here.

The regulations would have required employees to be paid at least $913 per week ($47,476 per year) to qualify as exempt under the executive, administrative or professional exemptions to the FLSA, absent certain limited exceptions. The overtime rule also provided for “automatic” updating of the salary level every 3 years, which would have removed the current obligation to jump through administrative rulemaking hoops to increase the salary level for the “white collar” exemptions on that periodic basis.    

In reaching its conclusions, the District Court relied principally on statutory construction. Specifically, the Court noted that the FLSA defines exempt employees working in a “bona fide executive, administrative, or professional capacity” in terms of the duties performed, and does not include “a minimum salary level.”  29 U.S.C. § 213(a)(1). Accordingly, while the District Court recognized the DOL’s authority under the FLSA to “establish the types of duties that might qualify an employee for the exemption,” it concluded that the states had a substantial likelihood of success on the merits of their core contention that the DOL exceeded the authority delegated to it by Congress by “raising the minimum salary level such that it supplants the duties test.”    

The court further held that, even if it concluded that the FLSA was ambiguous (which it did not), the DOL’s overtime rule was not based on a permissible construction of the statute because Congress did not intend that the white collar exemptions would be defined by a “de facto salary-only test,” irrespective of job duties. As a result, the court enjoined the regulations.

In addition to preliminarily enjoining the regulations, the decision may have broader implications because the District Court’s analysis logically calls into question the validity of other DOL regulations.

According to Bloomberg Politics, the DOL said in an e-mailed statement that it was “considering all of its legal options.” Even assuming that the DOL is permitted to appeal immediately to the Fifth Circuit, however, its challenge to the injunction likely would not be addressed by the court of appeals until after Inauguration Day. And, of course, the new administration may adopt a different litigation posture than the current DOL after January 20, 2017.

While clearly a victory for the states that brought the lawsuit (and the coalition of business associations in a second lawsuit challenging the regulations on similar grounds), given that the decision was issued slightly more than 1 week before the regulations were set to take effect, many employers already have implemented their plans to increase wages or re-classify employees in anticipation of the December 1 effective date. Although employers certainly can take a fresh look at those decisions given the unsettled legal landscape, there are of course employee relations considerations in doing so.

If you would like to discuss the practical effects of the preliminary injunction, or if you have questions about the DOL’s Final Rule or overtime exemption issues generally, please contact Andrea M. Kirshenbaum, Chair of Post & Schell's Wage and Hour Practice Group, at 215.587.1126/akirshenbaum@postschell.com, or Darren M. Creasy, Employment & Employee Relations Principal at 215.587.6632/dcreasy@postschell.com.

About the Author

Andrea M. Kirshenbaum is the Chair of the Firm's Wage and Hour Practice Group, a Principal in its Employment & Employee Relations Practice Group, and a member of the Firm's Appellate Department. She defends employers nationally in federal and state court litigation involving all major employment statutes, represents them in related government investigations, and counsels them proactively on compliance with these statutes.

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