NATNews Blog > November 2016 > Court Issues Injunction Prohibiting Dec. 1 Implementation of DOL Overtime Rule

    Court Issues Injunction Prohibiting Dec. 1 Implementation of DOL Overtime Rule

    11/28/2016 8:23:05 AM
    The U.S. District Court for the Eastern District of Texas issued an injunction prohibiting the Department of Labor’s (DOL) overtime rule from taking effect on Dec. 1.  The court was responding to a petition brought by 21 state attorneys general and several business coalitions, arguing that the DOL had overstepped its statutory authority.

    The DOL issue a statement following the release of the court’s opinion saying it disagreed with the court and remained confident “in the legality of all aspects of the rule.”
    According to the DOL website, the new rule focuses primarily on updating the salary and compensation levels needed for executive, administrative and professional workers to be considered exempt. Specifically, the final rule:
    • Sets the standard salary level at $913 per week or $47,476 annually for a full-year worker (Prior to the rule change, the salary level was $455 per week or $23,600 annually, so this “adjustment” represents a dramatic increase.)
    • Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test at $134,004; and
    • Establishes a mechanism for automatically updating the salary and compensation levels every three years to ensure they continue to provide useful and effective tests for exemption.
    The court held, among other things, that the DOL had exceeded its delegated authority in its interpretation of the Fair Labor Standards Act (FLSA) in that it could not place the salary test above the executive, administrative or professional (EAP) test.
    “After reading the plain meanings together with the statute, it is clear Congress intended the EAP exemption to apply to employees doing actual executive, administrative and professional duties. In other words, Congress defined the EAP exemption with regard to duties, which does not include a minimum salary level,” the court noted in its opinion. “The statute’s use of ‘bona fide’ also confirms Congress’s intent. ‘Bona fide’ modifies the terms ‘executive, administrative, and professional capacity.’ The plain meaning of ‘bona fide’ and its placement in the statute indicate Congress intended the EAP exemption to apply based upon the tasks an employee actually performs. Therefore, Congress unambiguously expressed its intent for employees doing “bona fide executive, administrative, and professional capacity” duties to be exempt from overtime.”
    The court also ruled that the current regulations do not grant the DOL the authority to employ an automatic updating mechanism.
    Christie DeSanctis in writing for the National Association of Realtors noted that the DOL will likely appeal the decision and if the rule goes into effect, employers may face legal challenges by employees seeking past due overtime pay.
    “Therefore, employers are encouraged to speak with their legal counsel to determine whether to implement their existing plans to comply with DOL’s overtime rule despite this injunctive ruling or whether to wait for a final outcome by the courts,” DeSantis wrote. “Given the shift in administration and the expressed interest in repealing the rule, it is possible that the scheduled threshold salary increases may never occur.”