U.S. District Judge Amos Mazzant, a federal judge in Texas, granted a preliminary injunction blocking the U.S. Department of Labor (DOL) from implementing a controversial rule expanding overtime protection under the Fair Labor Standards Act on Tuesday Nov. 22, 2016.
A lawsuit challenging the rule was filed by 21 states and variety of employer groups, including the US Chamber of Commerce. The rule was set to increase the exemption threshold to $47,476, more than doubling the current threshold. Mazzant said states that challenged the rule were able to effectively show “irreparable harm” if it went into effect, while the DOL did not prove it would be harmed if the rule was not implemented. Mazzant prevented the rule from going into effect Dec. 1, giving employers a reprieve.
This injunction is somewhat of a surprise because Mazzant was appointed by President Obama. Obama was unable to increase the minimum wage rate via legislation through Congress, so he directed DOL to address the overtime exemption threshold. Employer’s concerns about how to adjust wage and hour processes may have swayed the court. Currently, two tests exist to be exempt from overtime, the duties test and the wages test. The court held that raising the wages to this level and have an automatic three year provision for further raises effectively eliminated the duties test. Mazzant added that if Congress had intended for a salary requirement to supplant the duties test, then Congress and not the DOL should make that change.
President-elect Trump has yet to say what his plans are for the overtime rule, though he has previously voiced support for small businesses. The DOL can appeal the ruling, but a Trump administration subsequently could drop any appeal. For now the expansion of the overtime threshold has been delayed. It is unclear if the rule will ever be made effective given the pending Trump administration.
However, it does not address the issues of employers which have already made the changes. It will be very difficult to go to your employees, put them back under the old rules and say “just kidding” on any raise that they were promised. More guidance will come in the new year.