November 23, 2016
On November 22, 2016, a Texas federal judge issued a preliminary injunction suspending enforcement of the new overtime rules promulgated by the U.S. Department of Labor (the "DOL"), which which were to go into effect on December 1, 2016. Under the overtime laws, certain executive, administrative, and professional employees are exempt from receiving overtime provided they meet three requirements:
- the employee must be paid on a salary basis;
- the employee must be paid at least a minimum salary level established by the DOL regulations; and
- the employee must perform executive, administrative, or professional duties.
One of the critical changes wrought by DOL’s new overtime rules - which rules were discussed in a prior post - was to increase the minimum salary level for white-collar employees from $455.00 per week (and $23,660.00 annually) to $921.00 per week (and $47,892 annually), thereby expanding the number of employees eligible for overtime by an estimated 4.2 million workers. The rules also established a mechanism by which the minimum salary level would increase every three years, with the first increase scheduled to occur on January 1, 2020.
Twenty-one states, including Louisiana, filed suit against the DOL requesting that the federal government be enjoined from enforcing the new overtime rules. Specifically, these states argued that Congress intended for the white collar exemption to be based on the employee’s responsibilities, not the employee’s salary. The court agreed, holding that the DOL may have exceeded its administrative authority by raising the minimum salary level. More specifically, because the statutory language of the white collar exemption is based entirely on the type of work performed by an employee (duties that are executive, administrative, and professional), rather than the employee’s salary, the DOL could not create a rule that creates a “de facto salary-only test.”
While the preliminary injunction does not render the DOL’s final rule invalid, it will delay implementation of the rule until the legality of the rule can be fully litigated. If the court ultimately rules that the DOL exceeded its authority, the final rule will be unenforceable, and will require the DOL to amend the final rule in such a way that it can be enforced. Furthermore, it should be noted that with a new presidential administration in place after January 2017, whether the overtime rules will ultimately be amended is very much in question.
As for now, employers must still comply with current overtime laws. However, employers should be mindful of any future rulings by the court pertaining to the new overtime rules. If you have any questions regarding the new overtime rules issued by the DOL, the effect of the preliminary injunction, or employment or labor law in general, please do not hesitate to contact our firm.
Disclaimer: The information provided herein (1) is for general information only; (2) does not create an attorney-client relationship between the author or the author’s firm and the reader; (3) does not constitute the provision of legal advice, tax advice, or professional consulting of any kind; and (4) does not substitute for consultation with professional legal, tax or other competent advisors. Before making any decision or taking any action in connection with the matters discussed herein, you should consult with a professional legal, tax and/or other advisor who should be provided with all pertinent facts relevant to your particular situation. The information provided herein is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information.Back