On November 22, 2016, the U.S. District Court for the Eastern District of Texas issued a nationwide injunction prohibiting the Department of Labor’s (DOL) controversial overtime rule from going into effect as scheduled on December 1, 2016. The rule would have doubled the salary threshold (to $47,476) under which non-exempted workers are guaranteed time-and-a-half pay if they work more than 40 hours in a given week. The rule would have also indexed the threshold to inflation, every three years starting in 2020.
While there is relief in knowing the regulation will not be in effect on December 1, DOL will likely appeal the decision. If DOL prevails on appeal and the rule goes into effect, employers may face legal challenges by employees seeking past due overtime pay. Therefore, employers are encouraged to speak with their legal counsel to determine whether to implement their existing plans to comply with DOL’s overtime rule despite this injunctive ruling or whether to wait for a final outcome by the courts. Given the shift in administration and the expressed interest in repealing the rule, it is possible that the scheduled threshold salary increases may never occur.
This injunction was the result of petitions brought by 21 state attorney generals and a business coalition that argued that the salary threshold was too high and that DOL exceeded its statutory authority by automatically indexing the threshold to inflation. In issuing the injunction, striking down the rule and the automatic updating mechanism, the court held DOL exceeded its delegated authority with its interpretation of the Fair Labor Standards Act (FLSA) and was not entitled to deference, as the statute was not ambiguous. By implementing a minimum salary requirement for employees and supplanting the existing employees’ duties test, DOL’s rule directly conflicts with the intent of the FLSA and Congress. According to the decision, the overtime rule would have resulted in approximately 4.2 million workers becoming eligible for overtime pay without a change to their duties that might qualify them for an exemption.