Nationwide Preliminary Injunction Delays New Overtime Rules

On November 22, 2016, the United States District Court for the Eastern District of Texas issued a nationwide preliminary injunction blocking the Department of Labor’s (“DOL”) amendments to the overtime provisions of the Fair Labor Standards Act (“FLSA”) that were set to go into effect on December 1, 2016. The preliminary injunction will prevent the DOL from enforcing the amendments for the time being and calls into question whether they will ever take effect.

By way of background, under the FLSA, non-exempt employees must receive overtime pay for all hours worked in excess of 40 hours in a workweek at a rate not less than 1.5 times their regular rate of pay. On May 17, 2016, the DOL issued amendments to the overtime provisions of the FLSA, which: (1) increase the salary threshold for the most common overtime exemptions (i.e., executive, administrative, professional, outside sales, computer employees) from $23,660 a year to $47,476 a year; and (2) increase the salary threshold for “highly compensated employees” from $100,000 per year to $134,000 per year. Both salary thresholds are indexed to update automatically every three years.

These changes were set to become effective on December 1, 2016. However, the nationwide preliminary injunction entered by the Eastern District of Texas on November 22, 2016, will delay enforcement of the new amendments indefinitely. The ruling comes after 21 states and over 50 business groups filed suit to prevent the enforcement of the amendments, arguing that they are unconstitutional. In its Order, the Court explained that the plaintiffs showed a likelihood of success on the merits and that they will suffer irreparable harm if the amendments were put into effect as scheduled on December 1, 2016. The DOL may choose to appeal the preliminary injunction, which could restore the December 1 effective date.  In the absence of such an appeal, the parties will proceed with litigating the validity of the amendments. Any final decision will undoubtedly face an appeal. When, if ever, the amendments will take effect is now unclear.

With the DOL now enjoined from enforcing the new amendments, employers may delay implementing any changes planned to the exemption status of their employees or other planned steps to be compliant with the new FLSA regulations until a final decision is rendered. Employers must still be mindful of potential changes to state overtime laws—such as the changes in New York set to take effect on December 31, 2016—that still require action. Employers that have already communicated planned changes to managers or employees should evaluate how to proceed with particular care. We will continue to monitor events closely and advise you of significant developments. If you have any questions or concerns regarding the DOL amendments or nationwide preliminary injunction please feel free to contact me.

By: Michael Miles, Esquire
Partner at Brown & Connery, LLP