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Department of Labor Appeals Injunction Halting Overtime Rule; No Decision Expected Until Early 2017

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12.09.2016 | Advisory

On December 1, the United States Department of Labor appealed the issuance of a preliminary injunction that blocked the implementation of its Final Rule that redefined the wage test for overtime exemptions under the Fair Labor Standards Act. That Final Rule was to be effective on December 1, and would have required employers to pay overtime to all so-called “white collar” executive, administrative, and professional workers earning less than $913 per week ($47,476 annually). The Fifth Circuit Court of Appeals, the court reviewing the preliminary injunction, will not make a decision on the injunction until February 2017 or later. The timing confirms the possibility that the Trump administration may drop the appeal before a decision is issued.

Background

In May 2016, the federal Department of Labor issued a Final Rule that increased substantially the minimum amount employers are required to pay employees who otherwise qualify for exempt status as an executive, administrative, or professional employee. Among other things, the new Rule required employers to pay exempt workers at least $913 per week ($47,476 per year), a substantial increase from the current requirement of $455 per week ($23,600 per year).

The Nationwide Injunction

Shortly after the Final Rule was issued, a group of states and business associations filed lawsuits against the Department of Labor and its Wage and Hour Division, challenged the Final Rule, and requested injunctive relief. The court consolidated the lawsuits of the states and business associations, and on November 22, a federal judge in the United States District Court for the Eastern District of Texas issued a preliminary injunction that prohibits the federal government from implementing and enforcing the new Rule. The court’s order applies nationwide.

Appeal of the Nationwide Injunction

On December 1, the United States Department of Labor appealed the issuance of the injunction to the Fifth Circuit Court of Appeals. Before the higher court, the Department will argue that its Final Rule is consistent with the Fair Labor Standards Act, and that the Texas federal court erred in issuing the injunction. A decision is not expected until February 2017 or later, after the new President takes office on January 20. President-Elect Trump criticized the Rule during his campaign for President and expressed support for a carve-out for small business, and it thus is possible that the Trump administration would drop the appeal or propose new rules.

What Is the Impact on Employers?

For now, employers may forgo implementing those changes that would have been required by the Rule on December 1. Employers who have already made changes to implement the new Rule, or who already have communicated upcoming changes to their employees, should consult labor and employment counsel and carefully consider the best approach to these issues.

This advisory was prepared by Liam T. O’Connell, chair of the Labor, Employment and Benefits practice group at Nutter McClennen & Fish LLP, and David Emer, an associate in that group. For more information, please contact Liam or your Nutter attorney at 617.439.2000.

This advisory is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

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