Blocked! Texas Court Preliminarily Halts Overtime Rules with Last-Minute Ruling

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In a dramatic last-minute development, a federal judge in Texas late yesterday blocked the U.S. Department of Labor’s (DOL) overtime rule from taking effect on December 1, handing an 11^th hour victory to employers across the country.

As our members are well aware, back in May, 2016 the DOL unveiled a package of revised regulations changing the compensation requirements for employees who can be treated as exempt from overtime pay, upping the minimum salary from $455 to $913 per week, which annualizes to $47,476 (up from $23,000 per year), and this rate would be then subsequently raised again every three years with the first hike scheduled for January 1, 2020. As we reported to you from the beginning, no changes were made to the “duties” test for qualifying for the exemption.

Almost immediately, there was an outcry from the business community, especially those – including ACCA – advocating on behalf of small business. In doubling the threshold, the DOL’s actions would likely reduce the number of exempt workers considerably while at the same time increase the compensation for those who would remain exempt, effectively manipulating exemption requirements to “give employees a raise” in a government-forced action.

In response to the announced changes, a group of 21 states and several business associations filed lawsuits in the Eastern District of Texas (a jurisdiction known to be pro-business) seeking a court order to block the rules from going into effect. (Somewhat ironically, the judge in that jurisdiction is an appointee by the current administration, which has been actively pushing the rules to take place.)

When the lawsuits were filed, few predicted that they would be successful. However, in a stunning blow to the Obama administration, the court’s ruling has the effect of (currently) dismantling one of its signatory regulatory achievements. In granting the preliminary injunction, the overtime rules are now blocked from being implemented on a nationwide basis, and the fate of the rules is now uncertain. The Trump administration will take over the DOL in less than two months’ time, and the incoming administration has repeatedly indicated it wants to eliminate unnecessary regulations as they pertain to the business community. Unless an appellate court reverses course in the next few weeks, it is very possible that the rules will be further delayed, completely overhauled, or scrapped completely once President Trump takes office.

Employers can breathe a sigh of relief – for now. It is almost a certainty that the decision will be appealed to the Fifth Circuit Court of Appeals, and if reversed and an employer has not been in compliance since the December 1, 2016 effective date, a prickly question arises: whether the existence of the preliminary injunction precludes any liability between the effective date and the date the Court of Appeals issues its decision. We do not have the answer to that, but advise you to keep a close eye on what will unroll over the next couple of months.

ACCA will continue communicating to its members any breaking developments with the overtime rules, and give you the best guidance we can, given the fluid nature of the litigation.

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Posted In: Government, Legal