DOL Overtime Rule Injunction

Author: Michael Cardman, XpertHR Legal Editor

A preliminary injunction issued November 22, 2016, by the US District Court for the Eastern District of Texas prevents the US Department of Labor (DOL) from implementing and enforcing its overtime rule.

The rule, which had been scheduled to take effect December 1, 2016, would have increased from $23,660 to $47,476 the minimum salary needed for many employees to be exempt from Fair Labor Standards Act (FLSA) overtime requirements.

For the time being, employers will no longer need to comply with the rule. However, as discussed below, there remains a possibility the rule could be resurrected. In addition, employers that had already made changes in anticipation of the rule taking effect December 1 will need to decide whether to repeal those changes and decide on how best to communicate with affected employees.

Down But Not Out

Although the odds appear slim, there is a possibility that the overtime rule could rise again.

The DOL has appealed to the 5th US Circuit Court of Appeals to overturn the injunction.

The 5th Circuit on December 8, 2016, granted the DOL's request for an expedited appeal.

However, the Trump administration could simply drop the appeal. That possibility appears likely, considering that Trump's intended nominee for Labor Secretary, Andrew Puzder, opposes the overtime rule. On January 25, 2017, the DOL asked the 5th Circuit for an extra 30 days to "allow incoming leadership personnel adequate time to consider the issues" before it responds to legal arguments offered by opponents of the overtime rule. The 5th Circuit granted the DOL's request on January 26, 2017.

So it remains possible that the DOL could continue its appeal or that the Texas AFL-CIO would be granted its motion to intervene as a defendant so it could continue the appeal if the DOL drops it.

Were that to happen, the 5th Circuit could overturn the injunction. The legal reasoning behind the injunction has been questioned by some supporters of the overtime rule.

If the injunction is overturned, the plaintiffs could appeal to the Supreme Court. If the Supreme Court hears the case, chances are good that it would be deadlocked 4-4 as it has been with many cases since the passing of Justice Antonin Scalia. Conceivably, the plaintiffs could file lawsuits in other circuits, possibly resulting in a nightmare scenario in which the overtime rule is in effect in some states but not others.

If the 5th Circuit were to overturn the district court's injunction, Congress might override the rule anyway under a law called the Congressional Review Act that allows the legislature to overturn executive branch regulations within a certain window - or it could pass new legislation amending the FLSA.

Next Steps for Employers

Because of the injunction, employers that had planned to reclassify salaried, exempt employees who earned between $23,660 and $47,476 as hourly, nonexempt employees can simply maintain their current pay practices. However, employers should start tracking those employees' hours because if the preliminary injunction is overturned, the plaintiffs' bar likely will argue that the DOL's overtime rule should have applied retroactively to December 1.

Employers that increased, or planned to increase, exempt employees' salaries to $47,476 to maintain their exempt status would be within their rights to rescind those raises (but not recoup any increased salary already paid). This approach poses employee relations challenges.

Additional Resources

Responding to the Overtime Injunction

Letter Informing an Employee That Pay Changes Are Rescinded

Letter Informing an Employee That Pay Changes Will Remain

Letter Informing an Employee That Pay Changes Are on Hold