Texas Federal Judge Issues Last-Minute Injunction to Stop New DOL Overtime Rules

In yet another setback to President Obama’s labor and employment regulatory efforts and legacy, on Tuesday November 22, 2016, a federal judge from the Eastern District of Texas issued a nationwide injunction preventing the Department of Labor (DOL) from enforcing its final overtime rules, which had been set to go into effect on December 1. As noted in our Advisory earlier this year, the DOL’s new rules would have significantly increased the minimum salary threshold for most employees to qualify for one of the "white collar exemptions" to overtime under the FLSA, up to US$47,476 per year, and would have created an automatic indexing every three years for future salary increases.

Earlier this fall, a consortium of 21 states, as well as various industry groups, filed two separate lawsuits, later consolidated together, to try and block the final rules from going into effect. Following oral argument last week, Judge Amos Mazzant (an Obama appointee) granted the requested nationwide emergency injunction based on his preliminary conclusion that the DOL did not have the authority to set a minimum salary threshold for the white collar exemptions. The FLSA itself only states that "bona fide" executive, administrative, and professional employees are exempt from overtime, and delegates to the Labor Commissioner (and hence, the DOL) the right to "define and delimit" those exceptions. Judge Mazzant found that the clear language of the FLSA only granted the DOL the authority to "define and delimit" the duties requirements of the exemptions (what it means to be an executive, administrative, or professional employee), but not the salary thresholds. (It is worth noting that minimum salary levels were first established by the DOL in 1938, and have been adjusted numerous times between 1938 and 1970, and again in 2004, without legal challenge.)

This decision marks the most recent example of a nationwide injunction delaying or blocking implementation of the Obama Administration’s labor-related regulatory initiatives. In the past five months alone, federal courts in Texas have enjoined the Department of Education from implementing its rule regarding transgender bathroom policies, the Department of Labor from implementing its new interpretation of the Labor Management Reporting Act’s "Persuader Rule," and the implementation of President Obama’s Fair Pay Safe Workplaces Executive Order as discussed in our recent Advisory.

Even before this injunction, and despite months of careful planning by many employers to comply with the looming December 1 deadline, it had been unclear whether, and in what form, the final overtime rules would survive once President-Elect Donald Trump took office. Republicans in Congress had also begun efforts to try and delay, block, or revise the new rules, which President Obama had promised to veto. This latest twist means that employers and employees, like the final rules, are truly left in a legal limbo. Although it is clear that the new overtime rules will not go into effect on December 1, employers that have already reclassified job positions, communicated prospective salary or other changes to employees, put into place new timekeeping practices, or budgeted to account for these changes, will now have extremely difficult decisions to make as they wait for more clarity.