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Time to Stick a Fork in the New Overtime Regulations?

The much-anticipated ruling on a challenge to the new overtime rules has arrived just in time for Thanksgiving, and has given employers nationwide something to be thankful for. Judge Amos Mazzant granted the request for a preliminary injunction brought by 21 states and various business organizations, meaning the rules will not go into effect on December 1 as previously planned.1 As covered earlier, those rules sought to raise the salary-level requirements for white-collar exemptions under the FLSA—nearly doubling the current threshold from $23,660 to $47,476—and would have resulted in more overtime-eligible employees than ever before.

The court pointed to conflict between the white-collar exemptions’ duties and salary tests in deciding to scrap the new rule. With the caveat that it was not ruling on the lawfulness of the salary test generally, the court nonetheless noted that, in its view, Congress drafted the white-collar exemptions with only job duties in mind. Thus, the court reasoned, the new overtime regulations, which would have raised the salary level to $913 per week, were in direct conflict with Congress’ intent. The court noted that the rule’s doubling of the salary threshold created “essentially a de-facto salary only test” that ignored employees’ job duties. Whether such reasoning will affect other courts’ considerations of the salary test going forward will be worth watching.

For now, although this seems like a boon to employers, it may have created an additional headache for employers who have changed their practices in anticipation of the new rules, and already started paying their employees additional overtime. Those employers may be faced with a daunting choice: take the new compensation away from their employees, at the cost of employee morale, or continue to pay more compensation than is required by law.

In any event, the ruling may be a mere warmup act, as the extent to which the incoming Donald Trump administration will alter the now-enjoined rules remains to be seen. Despite the likelihood that the decision is appealed to the Fifth Circuit, it seems unlikely that court would issue a decision before inauguration day. A variety of possibilities are on the table: The rules could be withdrawn entirely, the salary threshold could be lowered to a number somewhere between $23,660 and $47,476, or the rules could be modified to include exemptions for small employers. The Trump administration’s intentions should become clearer going forward, and the new administration may well act before the court issues a final ruling or any appeal is decided. In the meantime, employers can breathe a sigh of relief and press pause on their countdown to December 1.

1State of Nevada, et al. v. United States Dep’t of Labor, et al., Memorandum Opinion and Order, Doc. No. 60, C.A. No. 4:16CV00731 (E.D. Tex. Nov. 22, 2016).

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.