Last week, a Texas federal court entered a nationwide preliminary injunction blocking implementation of the Department of Labor’s (DOL) new overtime rule, which was set to take effect December 1, 2016.
Background. Among other things, the overtime rule significantly increased the standard salary level test for the administrative, professional and executive exemptions (collectively referred to as the “white collar” exemptions) under the Fair Labor Standards Act (FLSA). The new rule also set automatic increases for the salary thresholds.
The Temporary Injunction. The Texas court decided that the DOL rule would create “irreparable harm” if it went into effect on December 1, before the court had an opportunity to determine whether the rule was lawful. The court therefore issued the injunction to temporarily stop implementation of the rule until it rendered a final decision.
Employer Dilemma. In the meantime, employers face a quandary. The preliminary injunction blocks the DOL rule’s implementation on December 1, 2016, but many employers have already communicated and/or implemented changes in employee compensation levels in preparation for the December 1 deadline. Some employers also have converted employees to non-exempt status under the FLSA to ensure compliance.Employers now must decide whether to move forward with these changes or to delay making changes to salary levels and employee classifications until the court reaches a final decision on the validity of the DOL rule.
Employers weighing their options would be well advised to keep in mind the following:
- The preliminary injunction is not final; it is only temporary. The Texas court has not yet issued a final decision regarding whether the DOL rule is lawful.
- The DOL may pursue an appeal of the Texas court’s decision to temporarily block implementation of the rule. An appellate court has the power either to uphold or overturn the temporary injunction.
- Communications with employees will be essential to maintaining employee morale, especially if an employer is considering announcing that certain changes will not go into effect on December 1, 2016, in light of the temporary injunction.
- Employers should analyze potential legal risks associated with any decisions to reverse previously communicated or implemented salary increases and should consult legal counsel, when necessary.
- As an alternate, employers could proceed with complying with the DOL rule and make changes only if and when the courts issue a final ruling that the DOL rule is not enforceable or if the new administration changes or withdraws the DOL rule.