The U.S. Department of Labor (DOL) announced on December 1 that it will appeal a court’s injunction temporarily halting its new overtime regulations.
A federal judge for the U.S. District Court for the Eastern District of Texas blocked the rules on November 22, calling the regulations “unlawful” and noting that the changes in the rules should be left to Congress.
The rules would have increased the salary threshold for the Fair Labor Standards Act’s (FLSA) white-collar exemptions. Current DOL regulations require employers to pay overtime to all employees making less than $455 per week ($23,600 per year), regardless of whether they meet any of the law’s duties tests. New regulations that were set to take effect on December 1 would have increased the threshold to $913 per week ($47,476 per year).
Twenty-one states sued, alleging the DOL overstepped its authority. Business groups filed a similar suit, and the two cases were consolidated. The plaintiffs requested an emergency injunction, which the court granted on a nationwide basis. State of Nevada v. United States Department of Labor, No. 4:16-cv-00731 (E.D. Texas, Nov. 22, 2016).
Business groups applauded the order, but the DOL immediately promised to consider further legal action. A few days later, it announced its intent to appeal.
Employer takeaway
It’s no surprise that the DOL appealed the order, according to Jo Ellen Whitney, a senior shareholder at Davis Brown and editor of Iowa Employment Law Letter. “The DOL spent considerable time and resources attempting to address what it considered a modern flaw in the classification system,” she said.
The judge’s reasoning in issuing the injunction also probably had something to do with it. The judge called into question the DOL’s existing salary basis test—not just the legality of the new regulations, according to Whitney. “A significant portion of the court’s ruling on the temporary injunction relies on the idea that the tripartite test of base wage rate, duties and salary basis of payment is flawed,” she explained. “That is very sweeping language for a temporary injunction.”
That means the duties test could receive greater weight in the future. “That makes it even more critical that employers continue to take this opportunity to review and correct classifications where the duties test component was at issue,” Whitney said.
Employers shouldn’t, however, take impulsive actions based on the appeal, says Michelle Lee Flores, a member of Cozen O’Connor and a contributor to California Employment Law Letter. “I think this shows that we are definitely in for a fight from both sides as to the legality and enforceability of the DOL’s rules,” she said.
Whitney agreed that ongoing and substantial litigation is likely. It is “by no means” clear that the rules won’t eventually take effect, she said.
Need to learn more? Join us December 13 for the live webinar DOL Final Overtime Exemption Rule Halted: The Practical Impact on Your Business Explained. BLR editor Cathy Gray will address many pressing questions and provide practical answers to help you navigate the uncertainty. As part of the sign-up process, you may submit your specific questions to be answered during the webinar. For more information, click here.