Judge issues OT rule injunction: What happens now?

Monday, November 28, 2016

A Texas federal court judge has issued a preliminary injunction, delaying the DOL’s changes to the FLSA overtime exemption rule. And while many may welcome the news, the reality is it creates a huge mess for employers. 

Granted, you could argue the rule changes themselves created a mess for employers. But for the most part, employers have adapted to them by now in preparation for the December 1 compliance deadline.

Employers are now left wondering: Now what?

For months, employers have been preparing to deal with a higher salary threshold for exemption — along with communicating to employees who make less than $47,000 about how the rule changes would affect those workers.

Now, those same employers are stuck between a rock and a hard place as the rule changes have been delayed indefinitely. Do they revert back to their previous pay practices and act like all the prep work they’ve done up to this point was all for naught — only to possibly have to move forward with their compliance plans in a few months if the DOL successfully defends its position on the rule? That would require a lot of delicate conversations with employees.

Or do employers move forward with their compliance plans as if the injunction/delay was never issued? That could result in having to shell out a lot more overtime than the FLSA would require.

Those are questions employers will have to address on their own — no federal court ruling can help.

What happened?

Judge Amos L. Mazzant, III, of the U.S. District Court for the Eastern District of Texas, Sherman Division — after hearing arguments from the DOL, as well as the 21 states and more than 50 business groups challenging the DOL’s changes to the overtime exemption salary threshold — issued a preliminary injunction against the changes.

The injunction doesn’t kill the rule changes. It simply halts them from becoming effective on December 1, the original compliance deadline. Whether or not the rule changes take effect, and when, will be determined at a later date in court. The injunction sets the stage for a future court battle, during which the judge will rule on the merits of the states’ and business groups’ lawsuit against the DOL.

But if the judge’s language in the injunction ruling is any indication, it sounds as though he’s likely to strike down the rule changes.

Mazzant ruled the DOL exceeded its authority by raising the overtime salary limit so significantly (from $23,660 to $47,476). He said the DOL’s rule changes, essentially, made the exemption test a one-factor test based on salary alone. He said the changes basically eliminated the duties test, and he said the DOL must examine the duties of employees to determine who falls within the FLSA’s overtime exemption.

What’s next?

No timetable has been given on when the judge would rule on the merits of the lawsuit.

If the judge does, in fact, determine that the DOL had the authority to raise the salary threshold as much as it’s trying to do, the rule changes could take effect rather quickly after his ruling. As a result, employers must stay ready to comply with the changes.

The question now is whether or not the DOL will attempt to defend its position — especially in light of the fact that the Trump administration will take office in less than two months.

With as much as Trump and the GOP have talked about rolling back the regulation promulgated by the Obama administration, there’s a good chance the Trump administration will decide not to dump federal resources into defending the DOL’s position that it had the statutory authority to implement such a high salary threshold. That would be a death blow for the rule.

Another possibility: Trump will work with the DOL to issue a smaller increase to the salary threshold. Several of the business groups involved in the lawsuit have said they’d be OK with a more moderate increase to the threshold. But with as much as Trump has indicated he wants to focus on rolling back regulations, it’s unlikely he’d take this approach anytime soon.

Stay tuned.

This article originally appeared on HRMorning.com. To view the original article, please click here