Federal Judge Halts New FLSA Overtime Rules

A federal judge has halted implementation and enforcement of the new Fair Labor Standards Act (FLSA) overtime rules detailed in the July and October 2016 issues of the League's  the Municipality and scheduled to take effect December 1, 2016. 

On November 22nd, a U.S. District Court judge for the Eastern District of Texas granted an Emergency Motion for Preliminary Injunction in an action brought by 21 states, including Wisconsin, that challenged the new rules and the Department of Labor's (DOL's) authority to enact them.  The action was consolidated with a similar action brought by various business organizations. State of Nevada v. United States Department of Labor, Civil Action No. 4:16-CV-00731 (E.D. Tx).  The injunction is effective nationwide.

The court agreed with the plaintiff States that the FLSA does not authorize DOL to use a salary-level test to determine whether employees are performing administrative, executive or professional duties or authorize use of an automatic updating mechanism.  The court concluded a preliminary injunction was warranted because the State Plaintiffs had demonstrated a substantial likelihood of success on the merits and that they were likely to suffer irreparable harm if the court didn't grant the injunction.  Furthermore, the court concluded that the balance of hardships favored granting a preliminary injunction because "1) the States will be required to spend substantial sums of unrecoverable public funds if the Final Rule goes into effect; and 2) the Final Rule causes interference with government services, administrative disruption, employee terminations or reclassifications, and harm to the general public" whereas DOL failed to articulate any harm it would suffer if implementation of the Final Rule was delayed.   Id. at 16 - 17

What Does This Mean for Municipalities?

The preliminary injunction is temporary in nature and is intended to allow the Court time to render a decision on the merits. Given that the judge concluded the Plaintiff States had demonstrated a substantial likelihood of success on the merits, it is quite possible that the judge will reach the same conclusion when he considers the issue on the merits.  

It is important for municipalities to be aware that the preliminary injunction only halts implementation and enforcement of DOL's Final Rule.  The U. S. District Court's preliminary injunction does not affect or halt any actions municipalities may have taken in anticipation of the Final Rule going into effect on December 1.   Municipalities will need to decide how to appropriately deal with any changes (reclassification of employees, salary increases, etc.)  that were made to ensure compliance with the Final Rule.  We suggest that municipalities consult with their municipal attorney before taking any action.