More Questions for Employers As DOL Appeals Preliminary Injunction of Overtime Rules

On December 1, 2016, the date that the Department of Labor regulations were set to become effective, the government filed a notice of appeal [link to] of the November 22, 2016 the United States District Court for the Eastern District of Texas’s Order granting a nationwide preliminary injunction “from implementing and enforcing” the DOL’s new overtime regulations. Those regulations would have raised the minimum salary level for exempt employees from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). The Court’s ruling was based, in part, on its holding that the DOL exceeded its delegated authority by changing the salary basis test at a level that was contrary to Congress’ intent that executive, administrative and professional employees be exempted from coverage of the FLSA. A full copy of the injunction order can be found here. In the wake of the Court’s ruling and now uncertain future regarding the DOL’s new overtime rules, we thought it would be helpful to provide some interim guidance on frequently asked questions we have received since the Court’s ruling. 

Does the Court’s order apply to private employers?  The Texas case challenging the rule is a consolidated action that includes two sets of plaintiffs. The State Plaintiffs include 21 states seeking to void the new rules as to state employers. The Business Plaintiffs are a collective of fifty business organizations seeking similar relief on behalf of private employers. The State Plaintiffs brought the request for preliminary injunction on behalf of state employees. Given the breadth of the Court’s injunction enjoining “implementation” of the new rules, however, there are strong arguments that the injunction applies to both state and private employers. This view is further supported by the Court’s reference to the Business Plaintiffs’ summary judgment briefing and arguments in the injunction decision and the fact that the Court determined that expedited briefing on the Business Plaintiffs’ pending summary judgment motion was unnecessary if the injunction was granted (implying that the Business Plaintiffs would be protected by the injunction while their motion was pending).

What next? Now that the DOL has filed its Notice of Appeal, its brief must be filed within 40 days of when the Fifth Circuit issues a briefing notice unless the court expedites the briefing schedule. In addition to the DOL’s appeal, the Texas District Court still needs to decide the Business Plaintiffs’ related summary judgment motion that was fully briefed as of November 21, 2016. Given the Court’s holding in the preliminary injunction order that the new rules are unlawful, it is very possible that the Court may similarly grant summary judgment invalidating the rules. That decision is also subject to appeal. Moreover, it is uncertain what impact the changes in the presidential administration will have on the government’s desire to press an appeal or abandon the appeal and propose new regulations.

What happens if the injunction is reversed? If the injunction is reversed on appeal, there are strong arguments that employers should be exempted from complying with the new rules from December 1, 2016 (the date the rule was supposed to go into effect) until the date the injunction is lifted. The Court’s injunction includes broad language enjoining the DOL from not only enforcing, but “implementing” the new rules. This indicates that the new rules are stayed pending further guidance from the Court. While the DOL has not stated its legal position regarding enforcement, this view is also consistent with the DOL’s prior practice of not enforcing rules while an injunction is pending.

What do we do now? There is no one-size-fits-all approach for how employers should respond to the Court’s ruling.  Factors to be considered are whether employees were already informed of a salary increase or of reclassification and what the rationale was for the salary increase or the reclassification decision. For employers that have already implemented changes or informed employees of anticipated changes, we recommend seeking individualized advice of counsel prior to changing course. For employers that have not yet implemented or messaged salary or classification changes, there are presently strong arguments that you are not obligated to do so unless and until the injunction is lifted.  Although the Court’s order prevents the implementation of the federal salary threshold increases, employers should stay mindful of state salary thresholds in making these decisions.

If you have any additional questions or would like further advice related to the above issues, please don’t hesitate to reach out. We will continue to monitor this closely and provide further updates of any important developments.