Texas Judge Issues Nationwide Injunction Against New Overtime Rule and the U.S. Department of Labor Seeks Expedited Appeal
12/06/2016

CLIENT ALERT: Texas Judge Issues Nationwide Injunction Against New Overtime Rule and the U.S. Department of Labor Seeks Expedited Appeal

As many employers have heard by now, a federal judge in Texas issued a nationwide preliminary injunction blocking the Department of Labor’s rule requiring overtime pay for more than 4 million new workers. Judge Amos Mazzant ruled that the 21 states and more than 50 business groups that sued to block the rule would suffer serious financial harm if the rule was put into effect as scheduled on December 1, 2016.

Judge Mazzant suggested the Obama administration may have overstepped its authority by raising the salary cap below which all workers must receive overtime pay from $455 a week to $921 a week, or $47,892 a year. The administration argued it was merely updating the rule to “keep up with our modern economy." However, Judge Mazzant said the increase to the 40th percentile of all weekly earnings in the U.S. effectively eliminated the exception in the Fair Labor Standards Act for "bona fide executive, administrative or professional" employees. Judge Mazzant reasoned this change would no longer require the Department of Labor to examine the duties of employees to determine who fits the exception. By raising the salary cap so high, he concluded that "the Department exceeds it delegated authority and ignores Congress's intent by raising the minimum salary level such that it supplants the duties test."

The injunction halts enforcement of the new rule, and the Department of Labor indicated on December 1 that it would appeal the injunction to the Fifth Circuit Court of Appeals. On December 2, the Department of Labor filed a motion with the Fifth Circuit requesting an expedited briefing schedule that would require the appeal to be fully briefed by February 7, 2017, and scheduled for argument as soon as possible thereafter.  Some commentators have noted that this date is after the inauguration of President-elect Trump, and the Department of Labor may adopt a different litigation strategy after his inauguration. Additionally, the district court has yet to rule on the plaintiffs’ motion for summary judgment, which may also affect the timing of the appeal.

The Department of Labor also asked the Court of Appeals to require the plaintiffs to respond to the motion by December 6, and that the Court issue a ruling on the motion by December 8. If the Court grants the motion with the schedule proposed by the Department of Labor, the agency’s opening brief would be filed on December 16, 2016.

Practical Implications for Employers

This situation creates a quandary for employers, especially those which have already implemented the anticipated salary adjustment or reclassified employees.  A reversal of a salary change or reclassification already put in place by an employer may harm morale, and the employer may be placed in a worse light if the injunction is lifted and possibly expose itself to adverse legal consequences from confused or frustrated employees.  If no action has been taken by an employer to date, we think it makes sense to stand by and watch for further developments.  The Fifth Circuit may reverse, and/or the incoming Trump Administration may take a different approach.  The issues surrounding the DOL mandated salary adjustment are far from settled.