Michael S. Powers

Michael S. Powers Associate

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FEDERAL COURT BLOCKS DEPARTMENT OF LABOR OVERTIME RULE WITH NATIONAL INJUNCTION

Federal Judge Amos Mazzant of the Eastern District of Texas has issued a preliminary injunction blocking the Obama Administration’s overtime rule that was set to take effect on December 1, 2016.  The Judge issued his ruling late in the afternoon on Tuesday, November 22, 2016.  In issuing the injunction, Judge Mazzant blocked the rule from taking effect nationally.  Had the rule taken effect, it would have made employees eligible for overtime unless they made $47,476 or more per year, a significant increase from the current rule’s $23,600.  This so called “salary test” for overtime exemption is in addition to the “duties tests” which require that employees fit into certain categories based upon the duties of their position in order to be exempt from overtime.  The salary basis for exemption was last updated in 2004.

The parties seeking the injunction against the Department of Labor’s (“DOL”) rule were a group of business interests, including chambers of commerce, and a separate group of 21 states’ attorney generals.  The independent actions of the states and the business plaintiffs had been joined into one action earlier this month.  In order to grant the injunction, the Court had to find that the parties had established the following elements: (1) a substantial likelihood of success on the merits; (2) a substantial threat that plaintiffs will suffer irreparable harm if the injunction is not granted; (3) that the threatened injury outweighs any damage that the injunction might cause the defendant; and (4) that the injunction will not disserve the public interest.  The Court found just that.

The biggest issue from a legal standpoint was always the first element, the likelihood of success.  In granting the injunction, the Court found that the DOL had exceeded the authority granted it by Congress by establishing a salary test.  The Court found that Congress had granted the Department the authority to determine which classifications of workers were eligible to be exempt, but not to determine a salary level requirement for those exemptions.  The existing classifications were not at issue here, and the rule set to take effect December 1 did not seek to change the existing exemption categories.  Regarding the salary test, however, the Court found that the rule was “against the statutory intent” and that only Congress could make that change.

This decision follows close on the heels of the blocking of the Department’s “persuader rule” which would have required law firms to disclose when they performed work related to union organizing.

While this is not the end of the road for the Department’s overtime rule, it is a major decision for a rule set to take effect in only nine days.  It is expected that the DOL will appeal the decision to the 5th Circuit Court of Appeals, based in New Orleans.  Unless the DOL successfully appeals the injunction, implementation of the rule will be put on hold awaiting a trial on its merits.  Even before the injunction was granted, the rule faced renewed scrutiny after the recent presidential election, as the incoming administration is considered unlikely to maintain it in its current form.  Now, even if the rule does survive the legal challenge, it likely will be delayed sufficiently to allow the new administration to change its course entirely.  Whatever the future holds, what is most important for employers to know is that the new rule will not take effect on December 1 as previously scheduled, and for the time being, the existing overtime rules will remain in effect.

The St. Louis employment attorneys at McMahon Berger have been representing employers across the country in labor and employment matters, including those relating to the ADA, for sixty years, and are available to discuss these issues and others.  As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation as every situation must be evaluated on its own facts.  The choice of a lawyer is an important decision and should not be based solely on advertisements.

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