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Employment Alert - Injunction Temporarily  Halts Overtime Rule Which Increased the  Salary Basis for Exempt Employees
November 28, 2016

No one will call November 2016 dull in regard to the federal government.  Just days before the new overtime rule was scheduled to become effective, on Tuesday November 22, U.S. District Court Judge, Amos Mazzant, in Texas, granted a preliminary injunction which temporarily stops the new Fair Labor Standards Act (FLSA) overtime rule from becoming effective on December 1 throughout all 50 states.  As many of you know, the new overtime rule revised the salary requirement for employees who could be exempt from overtime due to a "White Collar exemption" (Administrative, Executive, Professional.) The lawsuit heard by Judge Mazzant was a combination of two lawsuits which included a lawsuit filed on behalf of 21 states who claimed that the Department of Labor (DOL) exceeded its authority when it increased the salary requirement and by setting automatic adjustments for the salary rate every three years.

New Overtime Rule

As reported in our Employment Alert back in May 2016, the DOL issued its final rule which made significant changes to the FLSA salary basis test for the White Collar exemption from overtime regulations.  This final rule increased the required salary basis for exempt employees from an annual amount of $23,660 to $47,476.   This amount was based on the United States lowest wage Census region, which is currently the South. The rule also increased the salary basis test for highly compensated employees from $100,000 to $134,004. (The highly compensated exemption is not recognized by all states.) This rule did not require businesses to automatically increase salaries but gave the choice of paying at least $47,476 to employees who could be exempt from overtime pay or pay those employees an hourly rate and overtime pay when the employee works more than 40 hours in the defined workweek.

Preliminary Injunction Ruling

Judge Mazzant ruled the plaintiffs could suffer irreparable harm if an injunction was not issued to maintain the status quo until the lawsuit could be fully litigated.  He also held that plaintiffs (the 21 states and others) would likely prevail on the merits of their arguments that the DOL exceeded its authority with the new overtime rule. He held Congress intended the exemption to overtime to depend on an employee's duties rather than an employee's salary. Further, if "Congress intended the salary requirement to supplant the duties test, then Congress, and not the Department should make that change." This holding fails to fully address the salary basis test in the original FLSA which sets a floor for the exempt employee's salary.
 
The preliminary injunction allows the parties to push forward and fully litigate whether or not the DOL had the authority to issue the final rule. If the court finds that the DOL did actually have authority then this injunction will only delay the timing of the DOL's implementation of the regulation. If the court rules that the DOL did not have authority, we will wait to see if Congress proposes legislation to address the need to modernize these rules. 

What To Do

For now, the new overtime rule is not law and the current law will remain effective.  For those who had identified the need to increase salaries to protect the exempt status of certain employees under the new rule, those employers can wait until the court rules.  For those who have already increased salary or realigned positions from exempt to hourly nonexempt status, you need to consider the business impact of making any further changes before there is a final ruling which may require compliance with the new overtime rule.
 
Please call the FWW Employment Practice Group with any questions or concerns arising out of this litigation. 
 

AttorneysFarleigh Wada Witt Employment Attorneys for Wage & Hour Issues

Kelly Tilden
Kelly Tilden  focuses her practice in the areas of employment law, business, and litigation. She advises clients regarding the hiring, discipline and termination of employees, compliance with state and federal civil rights, wage and hour laws, and leave laws. Kelly offers practical guidance and experienced-based insight to help employers confidently apply state and federal regulations.

Contact Kelly at 503.228.6044 or ktilden@fwwlaw.com

Kim McGair
Kim McGair 's practice emphasizes a wide range of litigation matters including employment, commercial litigation, commercial collections, personal injury defense, and real estate litigation. She is an advocate for her clients and provides them with sensible advice and strong representation to protect their interests and help them achieve their objectives as efficiently as possible.

Contact Kim at 503.228.6044 or kmcgair@fwwlaw.com

Trish Walsh
Trish Walsh  focuses her practice in the areas of litigation and employment law, protecting clients' interests inside and outside the courtroom. In her employment practice, Trish drafts, audits and updates policy handbooks and provides advice on employment issues under Oregon, Washington and federal laws.

Contact Trish at 503.228.6044 or twalsh@fwwlaw.com

Copyright © 2016 Farleigh Wada Witt. All Rights Reserved.

 

The contents of this publication are intended for general information only and should not be construed as legal advice or opinion on specific facts and circumstances.

 

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