For the past several months, we’ve tried to keep our members abreast of the developments regarding the Department of Labor’s new rules for overtime exemptions. Last evening, Judge Amos Mazzant, in Sherman, TX stopped those new rules from going into effect indefinitely nationwide.
Back in May, the Department of Labor issued new rules which determine which employees are eligible for Executive, Administrative and Professional exemptions from overtime under the Fair Labor Standards Act. For the most part the changes were to the minimum weekly salary that has been one of the tests for whether the employee is a bona fide executive, administrative or professional employee. Currently the minimum salary is $455 per week. The new rule would raise that minimum to $913 per week. The minimum salary is combined with a duties test to determine whether or not the employee met the exemptions. The new rule was set to go into effect on December 1, 2016
Late this Summer, twenty-one state governments sued the DoL over the new rule and shortly thereafter, a large number of business groups did the same. The Court determined there were enough overlapping issues that for the purposes of hearing for preliminary injunction, the cases would be merged. The cases were filed in Federal Court in the Eastern District of Texas in Sherman. The Obama appointed judge heard arguments last week on the combined case. Last evening he ruled that there was sufficient evidence that the case would win and that there would be irreparable harm to the plaintiffs if the rule went forward (among other things) that it would be in the best interest of all the parties that the rule be stopped nationwide.
In his ruling the Judge cited that Congress was unambiguous in its statement that the terms executive, administrative and professional were related to the activities the individuals performed and that the agency had no legal basis for arbitrarily setting a salary test for the rule. He also said that since there is no basis for the salary test, the annual adjustment portion of the rule would do additional harm. He clearly called these portions of the rule illegal.
As this was a hearing and ruling for a temporary injunction and not the case itself, the current rule isn’t changed. It doesn’t put an end date on the injunction so the full case may have to be heard before the rule is tossed or ultimately adopted. The Federal Government has a few options as I understand it. The first is to appeal to the Court of Appeals which is (as I understand it) a conservative court in New Orleans. They could withdraw the rule and rewrite it. They could take the case the rest of the way to its final conclusion. The Department has said they will be weighing all the options at their disposal.
In the meantime, Congress is considering whether to overturn the rule under their authority with the Regulatory Review Act. It is very unusual for Congress to take this measure and time is running out on this option but if they adjourn early, and take it up as first order under the new congress after Jan 20, President Trump would likely sign the bill where Pres Obama likely wouldn’t.
Options for Ginners
We know some of you have already made changes to affected employees pay method and wages while most have not. For now, the rule is stopped and you do not have to make any of those changes. More importantly, even if the rule goes forward, it gives you more time to accommodate your employees and transition to either a higher salary or punching a time clock.
It will be interesting to see how this continues to shake out given the election outcome and the verbiage in the Judges ruling.