Judge Blocks DOL's Overtime Exemption Rules

Nationwide injunction stalls massive overtime expansion, offers reprieve for employers

November 23, 2016

The United States District Court for the Eastern District of Texas issued a nationwide emergency injunction effectively preventing the United States Department of Labor (DOL) from enforcing its hotly contested overtime rule.

Brief Overview

The rule, a summary of which is available here, was slated to go into effect on December 1, 2016. A collection of 21 states, however, sued the federal government arguing, among other things, that the DOL was not authorized to create an exemption test that relies solely on a salary level test. While it is true the DOL maintained the salary-basis and "duties" requirement of the three-part overtime exemption test, the Court found that because the salary level was so dramatically increased (from $23,660 to $47,476), the DOL effectively created a "salary only" test for millions of employees. Said the Court,

"[T]his significant increase to the salary level creates essentially a de facto salary-only test. For instance, the [DOL] estimates 4.2 million workers currently ineligible for overtime, and who fall below the minimum salary level, will automatically become eligible under the Final Rule without a change to their duties. "

The court found this result "directly in conflict" with the language of the Fair Labor Standards Act, which is what gives the DOL the authority to draft overtime related regulations in the first place.

"The [DOL]’s role is to carry out Congress’s intent [outlined in the Fair Labor Standards Act]. If Congress intended the salary requirement to supplant the duties test, then Congress, and not the Department, should make that change."

What Now?

For now, employers are not required to comply with, or implement the requirements of the rule enjoined by the court.

The court's injunction is for an undetermined period of time but it will likely remain in effect until the case is ultimately decided (possibly at the Supreme Court level). It is worth noting that, while this injunction does not constitute a definitive ruling on the law suit, one of the factors a court considers before granting an injunction is whether the party seeking it has established "a substantial likelihood of success [of the claim] on the merits."

Further, even if this lawsuit ultimately fails and the courts find the DOL actually had authority to draft the regulations in the manner they did, the overtime rule is not entirely out of the woods. 

Even before the the 2016 election, Republicans in Congress had signaled their intent to challenge several crucial aspects of the overtime rule. Under President Obama, those challenges would have been significantly more difficult to sustain. President-Elect Trump, however, creates a more cooperative dynamic between the White House and the Republicans who retained control of Congress.

With the injunction now stalling implementation of the overtime rule likely well beyond President-Elect Trump's inauguration, it is entirely possible the rule will be scrapped altogether.

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