Following the Bouncing Ball on the ‘New’ Overtime Rules

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NEW YORK—On Nov. 22, 2016, the United States District Court for the Eastern District of Texas granted a request for a nationwide preliminary injunction enjoining the Department of Labor (DOL) "from implementing and enforcing" the new regulations increasing the salary basis test for overtime exemptions, set to go into effect on Dec. 1, 2016.

Those regulations would have raised the minimum salary level for exempt employees from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). The Court's ruling was based, in part, on its holding that the DOL exceeded its delegated authority by changing the salary basis test at a level that was contrary to Congress' intent that executive, administrative and professional employees be exempted from coverage of the FLSA.

In the wake of the Court's ruling and now uncertain future regarding the DOL's new overtime rules, we thought it would be helpful to provide some interim guidance on frequently asked questions that have arisen since the Court's ruling.

Does the Court's order apply to private employers?
The Texas case challenging the rule is a consolidated action that includes two sets of plaintiffs. The State Plaintiffs include 21 states seeking to void the new rules as to state employers. The Business Plaintiffs are a collective of 50 business organizations seeking similar relief on behalf of private employers. The State Plaintiffs brought the request for preliminary injunction on behalf of state employees.

Given the breadth of the Court's injunction enjoining "implementation" of the new rules, however, there are strong arguments that the injunction applies to both state and private employers. This view is further supported by the Court's reference to the Business Plaintiffs' summary judgment briefing and arguments in the injunction decision and the fact that the Court determined that expedited briefing on the Business Plaintiffs' pending summary judgment motion was unnecessary if the injunction was granted (implying that the Business Plaintiffs would be protected by the injunction while their motion was pending).

What’s next?
The DOL may appeal the preliminary injunction within 30 days via an interlocutory appeal. Additionally, the Court still needs to decide the Business Plaintiffs' related summary judgment motion that was fully briefed as of Nov. 21, 2016. Given the Court's holding in the preliminary injunction order that the new rules are unlawful, it is very possible that the Court may similarly grant summary judgment invalidating the rules.

That decision is also subject to appeal. Moreover, it is uncertain what impact the changes in the presidential administration will have on the government's desire to press an appeal or abandon the appeal and propose new regulations.

What happens if the injunction is reversed?
If the injunction is reversed on appeal, there are strong arguments that employers should be exempted from complying with the new rules from Dec. 1, 2016 (the date the rule was supposed to go into effect) until the date the injunction is lifted. The Court's injunction includes broad language enjoining the DOL from not only enforcing, but "implementing" the new rules. This indicates that the new rules are stayed pending further guidance from the Court. While the DOL has not stated its legal position regarding enforcement, this view is also consistent with the DOL's prior practice of not enforcing rules while an injunction is pending.

For now, what should employers do?
There is no one-size-fits-all approach for how employers should respond to the Court's ruling. Factors to be considered are whether employees were already informed of a salary increase or of reclassification and what the rationale was for the salary increase or the reclassification decision.

For employers that have already implemented changes or informed employees of anticipated changes, we recommend seeking individualized advice of counsel prior to changing course. For employers that have not yet implemented or messaged salary or classification changes, there are presently strong arguments that you are not obligated to do so unless and until the injunction is lifted.

Although the Court's order prevents the implementation of the federal salary threshold increases, employers should stay mindful of state salary thresholds in making these decisions. VM will continue to monitor this closely and provide further updates of any important developments.

For questions regarding the new overtime regulations, contact AOA Regulatory Policy Specialist Jensen Jose at jjose@aoa.org.

Hedley Lawson, Contributing Editor
Managing Partner
Aligned Growth Partners, LLC
(707) 217-0979
hlawson@alignedgrowth.com
www.alignedgrowth.com