Federal Judge Halts Final Overtime Rule Days Before Implementation

On November 22, U.S. District Court Judge Amos L. Mazzant III, sitting in Sherman, Texas, issued a nationwide preliminary injunction against the U.S. Department of Labor’s (“USDOL”) enforcement of its Final Overtime Rule which would have more than doubled the minimum salary employees must be paid to be treated as exempt from overtime. The USDOL estimated that the Final Overtime Rule, which was set to go into effect December 1, 2016, would capture 4.2 million workers into the overtime ranks.

The case, entitled Nevada v. U.S. Department of Labor, Civil Action No. 4:16-CV-00731, was filed by 21 states in the Eastern District of Texas. The States argued that the Department of Labor lacked the statutory authority to use a salary-level test and an automatic updating mechanism to determine overtime eligibility. Judge Mazzant agreed. Judge Mazzant found that under a plain reading of the statute, nothing in the White-Collar exemption indicates Congress intended the USDOL to define and delimit parameters for a minimum salary level. Instead, the focus is on the employee’s duties and Judge Mazzant found that the USDOL “exceed[ed] its delegated authority and ignor[ed] Congress’s intent by raising the minimum salary level such that it supplants the duties test.” While the USDOL may appeal the preliminary injunction, and the Court will eventually rule on whether to grant a permanent injunction, the Court has told the USDOL that it may not enforce the Rule.

So, what does this mean? For now, because of the nationwide preliminary injunction barring enforcement of the Overtime Rule, employers do not have to comply with the Overtime Rule’s requirements.  Right now, the current minimum salary that must be paid to qualify an executive, administrative or professional employee for an overtime exemption is $455 per week and this will remain the minimum salary on December 1st and until such time as Judge Mazzant’s decision is modified at the permanent injunction phase or successfully appealed.

Whether and when the government will appeal is unclear. The Final Overtime Rule is unpopular with employers, employer groups (like the Chamber of Commerce), and Senate and House Republicans. Whether President-elect Trump’s Department of Labor will defend the Overtime Rule in the face of State and business opposition is an issue that will be addressed in early 2017. We will keep you posted about any new developments regarding the Overtime Rule.

If you have any questions or would like to discuss the preliminary injunction against the Overtime Rule and options available to your business if it has already taken action to comply with the Overtime Rule, please contact John Vreeland in our Labor Group at (973) 535-7118 or jvreeland@genovaburns.com.