A federal district court judge has temporarily blocked the Department of Labor’s (“DOL”) new regulations governing the “white collar” overtime exemptions. The new regulations governing overtime exemptions under the Fair Labor Standards Act (“FLSA”) were published in May 2016, with an effective date of Dec. 1, 2016. Throughout the regulatory process, employers have spent countless hours evaluating compensation practices and planning for the new regulations. Many employers already have discussed intended changes with their employees. As of Nov. 22, 2016, intended plans may be subject to change.
Twenty-one states and many business groups filed suit against the DOL seeking to have the new regulations declared invalid. The lawsuit argued that the DOL exceeded its authority: (1) in establishing the new salary level for “white collar” exemptions; and (2) by providing for an automatic increase in salary level every three years. Yesterday, Judge Amos Mazzant (one of President Obama’s judicial appointees) issued a nationwide preliminary injunction barring the DOL from “implementing or enforcing” the new regulations until further order of the Court. This means the injunction covers employers in all states, including Alabama.
Judge Mazzant found the purpose of the FLSA provisions at issue “was to exempt from overtime those engaged in executive, administrative and professional capacity duties” with salary level intentionally set as a low threshold secondary consideration.” Judge Mazzant stated that the new regulations’ “significant increase to the salary level creates a de facto salary-only test” and “[i]f Congress intended the salary requirement to supplant the duties test, then Congress – and not the department – should make that change.”
A preliminary injunction is not a final order ruling the regulations invalid, but is the court’s determination that the States’ arguments have a substantial likelihood of ultimately succeeding. The status quo is maintained while the injunction is in place. In other words, the law has not changed and currently exempt employees will remain exempt for the time being.
The DOL is considering an appeal of the ruling, but it is highly unlikely that a decision would be made prior to Dec. 1, 2016 – the effective date established by the DOL. The delay in implementation allows Congress to weigh in on the issue. The ultimate question – will there be amendments to the law or regulations governing certain exemptions from overtime obligations – may not be answered for some time. It is clear the answer will not be made Dec. 1, 2016, giving employers a temporary reprieve. We will be watching this issue closely and provide updates about significant developments as they unfold.