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U.S. Department of Labor Overtime Rule Enjoined on a Nationwide Basis

On November 22, 2016, the U.S. District Court for the Eastern District of Texas issued a nationwide injunction, halting the planned December 1, 2016 effective date of the U.S. Department of Labor’s Overtime Rule.

The Court’s first step was to interpret Section 213(a)(1) of the Fair Labor Standards Act, which provides that “any employee employed in a bona fide executive, administrative, or professional capacity… as such terms are defined and delimited from time by regulations of the Secretary” shall be exempt from minimum wage and overtime requirements. The Court specifically noted that these words, i.e. “executive,” “administrative,” or “professional,” relate to a person’s performance, conduct, or function, without suggesting salary.

The Court ruled that Congress unambiguously “expressed its intent” for employees with “bona fide executive, administrative, and professional capacity” duties to be exempt from overtime. Congress intended the exemption to depend upon an employee’s duties, rather than an employee’s salary. Nothing in the exemption indicates that Congress intended the Department of Labor to define and delimit with respect to a minimum salary level.

The Court noted that the Department of Labor’s Final Rule is in direct conflict with Congressional intent because the Final Rule states, “White collar employees subject to the salary level test earning less than $913 per week will not qualify for the EAP exemption, and therefore will be eligible for overtime, irrespective of their duties and responsibilities.” Therefore, the Department of Labor exceeded its delegated authority and ignored Congressional intent by raising the minimum salary level such that it supplants the duties test. The Court stated, “[If] Congress intended the salary requirement to supplant the duties test, then Congress, and not the Department, should make that change.” Bottom line: The Overtime Rule is unlawful.

The Court went on to note that, because the Final Rule is unlawful, the Department of Labor also lacks the authority to implement the automatic updating mechanism to increase the salary level every three years.

The Court ruled that the plaintiffs (21 states plus business groups) will suffer irreparable harm if the Final Rule is not stopped. The Court agreed with the plaintiffs that it would impose a substantial hardship if the Final Rule is allowed to go into effect. In conclusion, the Court found, “[T]he public interest is best served by an injunction.” The Court decided that a nationwide injunction was proper in this case.

This decision grants an emergency Motion for a Preliminary Injunction. The case is not finally concluded. The Department of Labor is expected to appeal the decision. We will keep you updated as developments occur.

After January 20, 2017, expect a new, more business-friendly Secretary of Labor. Also expect Congressional action to wipe out the Final Rule. This writer predicts that, for all practical purposes, the Final Rule is dead.

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