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Federal Judge Blocks New Salary Level Overtime Regulations From Taking Effect December 1, 2016

November 22, 2016

A federal court in Texas late Tuesday, November 22, 2016, issued a preliminary injunction ("Injunction" or "Order") preventing the Department of Labor ("DOL")'s Final Rule and its regulations regarding the salary level for the main overtime exemptions from taking effect. The Court's Injunction not only prevents the regulations related to the Final Rule from taking effect, it prevents the DOL from enforcing these new regulations. The Injunction is not a final order and is subject to revision or appeal, but is nationwide and takes effect immediately. It will remain in effect until further order of the Court or a Court of Appeals.

As we have reported previously, and as you no doubt have heard, the DOL's Final Rule (announced May 18, 2016), which was to go into effect December 1, 2016, more than doubled the salary level test for the executive, administrative and professional exemptions from overtime under the Fair Labor Standards Act, to $913 per week ($47,476 annually), up from the current $455 per week ($23,660 annually) – an increase of just over 100%. The Final Rule also imposed an escalator provision, with automatic "updates" every three years (beginning January 1, 2020).

Two federal court challenges to the Final Rule were filed in September 2016, each in the U.S. District Court for the Eastern District of Texas – one by 21 states and one by numerous business groups. The two cases were assigned to the same Judge, who then consolidated the cases. On November 22, the Court found the State Plaintiffs showed a likelihood of success on the merits (as to their argument that the Final Rule exceeds the DOL's authority), that they would suffer irreparable harm in the absence of an injunction, that the balance of hardships weighed in favor of granting an injunction, and that the public interest would be best served by an injunction. The Court thus blocked these new overtime regulations from taking effect and from being enforced. This is not a final decision on the merits, and the Injunction is not permanent. 

But the Injunction preserves the status quo, at least for now. Pending further order of the Court or a Court of Appeals, employers are not required at this time to abide by the Final Rule setting the salary level bar at $913 per week. The current minimum salary level, established by the current regulations, remains at $455 per week ($23,660 annually) until further legal developments may provide otherwise.

Stay tuned, and for questions on what effect (legal and practical) this decision may have on your organization, contact Paul A. Wilhelm at (313) 309-4269 | or another member of Clark Hill's Labor and Employment Practice Group.


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