November 12th, 2015
About Last Night: More on the Texas Federal Judge Halting the DOL’s New Overtime Rule
I was asleep. What happened? As we informed you last night, a federal judge in Texas has ordered that the Department of Labor (DOL) cannot implement its new regulation raising the salary threshold for the white collar exemptions under the Fair Labor Standards Act (FLSA). The new regulation would have raised the minimum salary to qualify for the executive, administrative and professional exemptions from $23,660 to $47,476, effective December 1, 2016. Yesterday’s order prevents the DOL from implementing the new rule nationwide.
The judge’s order was not only a surprise to those who have been following the case, but stunning in how far the judge went. Not only did the Texas judge invalidate the new higher salary threshold, but he also found that DOL did not have the authority to adopt any salary threshold for the exemptions – something DOL has been doing since 1949. In essence, the court held that DOL could only establish what types of duties qualified as exempt but could not impose any minimum salary.
What does this mean? For now, the new salary rule is on hold and its future is very uncertain. We expect an emergency appeal from the Obama DOL. If the Court of Appeals expedites its consideration (which is possible considering its sweeping breadth), the ruling could be reversed fairly quickly. If the appeal takes the normal appellate path, it likely would not be decided for many months and the Trump DOL (which takes the helm on January 20th) could choose to drop the appeal and let the order invalidating the new rule stand. Or Congress or the Trump administration could adopt their own rules – either of which would take time.
What should I do now? Most employers have been planning for this change for months and many have already made the changes (raising salaries or converting employees to non-exempt status) necessary for compliance. Obviously, for employee morale reasons, it will be difficult to take back raises which have already been implemented; switching employees back to exempt status will be less painful. For those who have not yet made changes, you have the option of holding off on implementing changes to see what happens. If you take this course, we recommend you be ready to implement the changes quickly should the regulation be reinstated.