Employment Alert: "Nationwide Injunction Blocks the Department of Labor's Overtime Rule"

Publication
11.26.2016

Yesterday, a federal judge in Texas issued a nationwide injunction blocking the Department of Labor’s new overtime regulations intended to go into effect on December 1, 2016.  (see Court's opinion here)  The regulations would have entitled millions of additional employees to overtime compensation.  The new rule was intended to raise the minimum salary level for several exemptions, including the administrative, executive, and professional exemptions, from $455 per week ($23,660 annually) to $913 per week ($47,476 annually).   

In the lawsuit, filed by twenty-two states, the Plaintiffs argued that the Department of Labor did not have the authority to raise the minimum salary levels for the exemptions and that the increased salaries created a “de facto” salary test that supplanted the applicable duties tests for the exemptions.  The Judge held that the overtime rule was unlawful and granted the injunction, delaying the effectiveness of the regulations until a ruling can be made on the merits of the case.

Since the regulations were announced earlier this year, employers have been considering whether to reclassify certain employees as nonexempt or increase their salaries.  Some companies have already reclassified employees or changed their compensation structure in anticipation of the December 1st deadline.  If changes already have been made, it may be difficult or premature to revert back to prior classifications and salaries, but the situation will vary company to company.  If changes have not been made or communicated to employees, then the delay of the new overtime rule will certainly benefit the employer, at least for now. 

How best to move forward depends in part on where an employer is in the process of trying to comply with the new rule and what has been communicated to employees.  All employers should be cautious about how to proceed in light of the injunction which has surprised a lot of companies just days before the effective date of the regulations. 

This development creates uncertainty moving forward.  It is important to note that this opinion is not the final say on this issue, and we will definitely hear more about this in the upcoming months.

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