Injunction Blocking New Overtime Rule Remains in Effect Pending Appeal

By: Robert Bowes

Despite protest from the Department of Labor (“DOL”), a nationwide injunction blocking the implementation of a drastic change to the overtime rules under the Fair Labor Standards Act (“FLSA”) will remain in place while the injunction is appealed.

In May of last year, the DOL issued a new rule that would increase the minimum salary levels required to qualify as an “exempt” employee under the Fair Labor Standards Act (“FLSA”). Exempt employees are not eligible for overtime pay under the FLSA. The minimum salary threshold for exempt “white collar employees” would be increased to $921 per week/$47,892 per year, and the minimum salary threshold for exempt “highly compensated employees” would be increased to $122,148 per year – almost double the current limits.

The new rule was set to go into effect on December 1, 2016.  However, concerns within the business community and Congress prompted numerous lawsuits to be filed aimed at blocking the new rule, and on November 22, 2016, Judge Mazzant of the United States District Court for the Eastern District of Texas issued a nationwide preliminary injunction halting the implementation of the new rule. In so doing, Judge Mazzant concluded that the DOL had acted beyond its authority in enacting the new overtime rule.

The DOL appealed the judge’s injunction decision to the 5th Circuit Court of Appeals on December 1, 2016. The parties are to complete their briefing of the legal issues involved in the appeal by the end of January, and the 5th Circuit Court of Appeals will hear oral argument thereafter. Crucially, however, since the injunction ruling on appeal was not a final decision of the overall dispute concerning the new overtime rule, the dispute ordinarily would move forward in front of Judge Mazzant – i.e., at the trial court level. Because of this, the DOL asked Judge Mazzant to exercise the discretion afforded him by law to stay (pause) the lawsuit entirely until the 5th Circuit Court of Appeals rules on the appeal of his injunction decision.

Judge Mazzant rejected the DOL’s request. He ruled that the DOL had not shown that it was likely to convince the 5th Circuit Court of Appeals to overturn his injunction decision blocking the new overtime rule from taking effect, affirming that he believes his ruling was correct.

This ruling places the future of the DOL’s new overtime rule in further doubt. It will also allow Judge Mazzant, if he so chooses, to rule on the plaintiffs’ pending Motion for Summary Judgment on the merits of the dispute before a ruling from the Fifth Circuit Court of Appeals regarding the preliminary injunction. This would restart the appeal process and further delay implementation of the new rule (if it is ultimately determined that the DOL had the authority to implement it altogether). Furthermore, it is possible that either: (i) the new Trump administration could simply direct the DOL to abandon its defense of the new rule; or, (ii) Congress could take action to block the new rule.

As we have noted in the past, employers likely will want to leave decisions in place if they have already provided salary increases to employees in order to maintain their exempt status – provided that such increases still enable employers to function effectively and profitably.  If there are exempt employees who were going to be reclassified to nonexempt, but have not been reclassified yet, employers should postpone those decisions and allow the litigation process to run its course.

Please contact your Hahn Loeser & Parks Labor and Employment attorneys for more information on these continuing developments.