Not So Fast! Texas Court Orders Nationwide Halt to New Overtime Rule

In a month filled with unpredictability and unforeseen surprises, a federal judge in Texas has just issued another shocker that creates substantial uncertainty as to whether and when the United States Department of Labor’s (“DOL”) new Overtime Rule may go into effect.  On November 22, 2016, U.S. District Judge Amos Mazzant III issued a nationwide preliminary injunction temporarily blocking the new Rule from taking effect on December 1, 2016.  As highlighted in our September 22, 2016 post, a coalition of 21 states and a separate group of more than 50 chambers of commerce and other trade associations filed separate lawsuits in the Eastern District of Texas seeking to prevent the Obama administration from implementing the Overtime Rule.  Focusing on the anticipated economic harm to businesses of all sizes and states in their capacity as government employers, both lawsuits sought declarations that the DOL unlawfully exceeded its statutory authority in promulgating the new Rule, which, among other things, called for increasing the annual salary threshold for exempt employees from $23,660 to $47,476, thereby making an estimated additional 4.2 million U.S. workers eligible to receive overtime.  Both lawsuits sought injunctive relief to prevent the Rule from taking effect on December 1.

Defying the general consensus that the two lawsuits had little chance of succeeding, Judge Mazzant issued the injunction, finding in part that Congress never intended that the “white collar” exemptions set forth in the Fair Labor Standards Act included a minimum salary requirement, but instead depended on the duties performed by the particular employee. Judge Mazzant has now put the Overtime Rule on ice, prohibiting the DOL from “implementing and enforcing” it. A copy of the decision can be found here.

In response to the decision, the DOL issued the following statement:

We strongly disagree with the decision by the court, which has the effect of delaying a fair day’s pay for a long day’s work for millions of hardworking Americans. The department’s overtime rule is the result of a comprehensive, inclusive rulemaking process, and we remain confident in the legality of all aspects of the rule. We are currently considering all of our legal options.

While the DOL says it is still considering all of its options, it almost certainly will appeal Judge Mazzant’s decision to the Fifth Circuit. However, an appellate decision may not be handed down before December 1st. This timing does little to provide answers to employers, who are now thrown into a zone of uncertainty. For those employers that have already restructured their compensation systems to comply with the new Rule––and communicated such changes to their employees––it may not be feasible or make business sense to press the “re-set” button and return to their previous systems. Employers that have not yet made changes may decide to maintain the status quo pending a final decision on this issue, which may mean waiting for the Supreme Court to make the ultimate decision. Of course, how this all plays out under the new Administration and the Republican-controlled Congress remains to be seen.

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience at large law firms, working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and labor and employment. We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.

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