New Overtime Rule's Future In Doubt Following Texas Court Ruling

On November 22, 2016, Judge Amos Mazzant of the Eastern District of Texas issued a nationwide preliminary injunction blocking the U.S. Department of Labor's new overtime rule from taking effect on December 1, 2016.  The new rule would have raised the minimum salary threshold for the white-collar exemption to $47,475, expanding overtime eligibility to roughly 4.2 million additional workers nationwide.  Judge Mazzant's ruling and the attitude of the incoming Republican Congress leave the future of this rule in doubt.

Judge Mazzant's preliminary injunction arose from a lawsuit filed by 21 state attorneys general and a coalition of business groups who sued to block the new overtime rule as exceeding the Department of Labor's authority.  In his decision, Judge Mazzant found that minimum salary test, which has been in effect since the 1940s, supplants the duties test for the executive, administrative and professional (i.e. "white-collar") exemption. Thus, based upon the plain text of the statute, the Court concluded that "[i]f Congress intended the salary requirement to supplant the duties test, then Congress, and not the Department, should make that change."

Though the preliminary injunction is temporary, it signals trouble for the future of the new overtime rule.  If the rule is struck down, as the initial ruling suggests it might, the appeal would be heard by the conservative 5th Circuit Court of Appeals.  In addition, Republican Congressional leadership has suggested that Congress will use the Congressional Review Act to permanently block the rule come mid-January.  Either way, employers who have given raises or made changes in advance of the new rule now find themselves the difficult position of deciding how to move forward.

New York employers should be aware that the New York Department of Labor has proposed state-level increases to the minimum salary level for executive and administrative exempt employees.  These regulations are expected to be finalized next month and take effect December 31, 2016.

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