News

Late Tuesday afternoon (November 22, 2016), a federal judge in Texas entered a nationwide preliminary injunction blocking implementation of a highly controversial rule that was set to take effect in less than 10 days (on December 1, 2016).  The judge’s injunction temporarily prevents the U.S. Department of Labor (DOL) from enforcing its controversial Proposed New Overtime Rule that would significantly expand overtime eligibility for millions for public and private sector employees.

In September 2016, two separate lawsuits were filed in U.S. District Court in the Eastern District of Texas challenging the legality of the DOL’s proposed changes.  The lawsuits—one filed by a group of 21 states and the other filed by a conglomerate of over 50 nationwide business groups and trade organizations—both sought to temporarily enjoin and permanently strike the DOL’s Proposed Rule from taking effect.  The federal court later consolidated the two suits into one case.

In granting the preliminary injunction on Tuesday, U.S. District Judge Amos Mazzant ruled that the states and businesses were able to show ”a likelihood of success in their challenge” of the Proposed Rule, as well as a likelihood of “irreparable harm” if the Proposed Rule went into effect on December 1^st.  In contrast, Judge Mazzant felt that the DOL failed to show it would be harmed if implementation of the Proposed Rule were delayed.

In their lawsuits, as well as during oral argument on their requests for the preliminary injunction, the states and businesses argued that the DOL’s rule would force many state and local governments, as well as private businesses, to increase their employment costs substantially.  If enacted, the Proposed Rule would double the minimum salary threshold—from the current $23,660 to the proposed $47,476—required for an employee to qualify for the Fair Labor Standards Act’s (FLSA) white collar exemptions.  To this end, the states and businesses contested the DOL’s policy behind the change to the Proposed Rule by arguing that the federal agency relied too heavily on the “salary level” earned by an employee and not enough on the kind of work an employee performs.  The states and businesses argued that such a policy disregarded the original text of the FLSA.

In initially siding with the states and businesses, Judge Mazzant held that the DOL wasn’t entitled to deference in creating the Proposed Rule, and that Congress intended the exemption to apply based on the tasks an employee actually performs.  The judge recognized that the DOL has “significant leeway” to establish the types of duties that might qualify an employee for the white collar exemptions, but that nothing in the text of the FLSA indicated Congress’s intention for the DOL to define employee classifications with respect to a minimum salary level.  Judge Mazzant ultimately opined that the DOL’s enactment of the Proposed Rule appeared to exceed its delegated authority and as a result, ignored Congress’s intent behind the FLSA.

In issuing the preliminary injunction, Judge Mazzant also agreed that the states and businesses would suffer irreparable harm being forced to comply with the new costs associated with the Proposed Rule—harm which could not be redressed or undone if the Court later decided in their favor in permanently striking the Proposed Rule. “Due to the approaching effective date of the final rule, the court’s ability to render a meaningful decision on the merits is in jeopardy,” Judge Mazzant said. “A preliminary injunction preserves the status quo while the court determines the department’s authority to make the final rule as well as the final rule’s validity.”

Representatives of the states and business groups who initiated the legal challenge were quick to praise the Court’s decision.  “Businesses and state and local governments across the country can breathe a sigh of relief now that this rule has been halted,” said Nevada Attorney General Adam Paul Laxalt.

Representatives for the DOL have yet to comment, so it remains to be seen if the federal government will simply allow the injunction to remain in place pending final resolution of the consolidated lawsuits.  Alternatively, the DOL could choose to pursue a countermanding order on appeal.  (However, since any appeal would be heard by the Fifth Circuit, the success of such an appeal is far from a certainty.)  Lurking above all of these legal maneuvers is the recent election of President Donald Trump, who has yet to publicly announce his intentions for the Proposed Rule.

So, while it still remains possible the Proposed Rule could ultimately take effect (either in full or in some modified form), the Court’s ruling on Tuesday is certainly a welcome reprieve for U.S. employers—at least for the time being.