DOL Files Action with Circuit Court to Enact New Overtime Regulations

Yesterday (December 1, 2016) the Department of Labor (DOL) filed papers with the Fifth Circuit Court of Appeals notifying the court that it would be seeking to overturn the surprising decision from a lower court judge who blocked implementation of the new overtime regulations.  For now, however, the injunction will stay in place until the courts notify us otherwise. 

In that decision, the judge found that the language of the Fair Labor Standards Act (FLSA) did not clearly require that employees had to be paid a certain minimum salary in order to be classified as exempt from overtime pay requirements.  Instead, the judge seems persuaded by an argument that only the nature of the duties performed by employees differentiates between exempt and non-exempt status.  That is to say, the concept of minimum salary levels that need to be paid in order to claim an exemption for an employee is false, despite it having been required for the past 60+ years. 

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A federal judge in Texas temporarily stopped the Department of Labor (DOL) from implementing and enforcing its new overtime rules.  Under the new rules employers seeking to classify executive/managerial, administrative or professional employees as exempt from overtime pay requirements would need to pay them an annual salary of at least $47,476.  As a result of the injunction the DOL is nationally prohibited from implementing and enforcing these new regulations which were otherwise set to go into effect on December 1. This ruling and these regulations have no impact on state overtime laws. 

Take-away points:  

  • The December 1 deadline to adjust certain exempt employees’ salaries or moving current exempt employees to non-exempt status will almost certainly not move forward.  This does not mean that these new regulations will never take effect.  The judge’s ruling is a temporary hold while he reviews the merits of the case brought against the federal government.  It could last weeks or months.  We do not know.  What we do know is that December 1 implementation will almost certainly not occur.
  • Executive/managerial, administrative and professional (EAP) employees currently classified as exempt who earn at least $23,660/year on a salaried basis will continue to be exempt from overtime pay requirements, assuming they meet the duties requirements for the relevant classification.
  • If you want to rescind the moves you have made to raise salaries or move currently exempt employees to non-exempt status you can seemingly safely do so until the injunction is lifted, if that ever occurs.  Communicating this decision to affected employees in advance will be required.   
  • Prognosticating: should this injunction continue into the next Presidential administration it is foreseeable that the DOL might flip entirely on the desire to implement these regulations and refuse to contest the injunction or defend the lawsuit.  If that occurred it would effectively end the new rules. 

Employers who have yet to implement changes to salaries and classifications are now left with the difficult decision of whether to continue with implementing the changes or waiting to see what occurs.  Employers who have already implemented have an even more difficult decision given they can now unwind the changes they have already made, at least for the time being. You are invited to contact your Thompson Coe labor and employment attorney to discuss this matter more fully.