Texas Court Halts Implementation of New Overtime Rule

Today, November 22, 2016, U.S. District Judge Amos L. Mazzant of the United States District Court for the Eastern District of Texas (Sherman Division) issued a preliminary injunction halting implementation of the new overtime rules that were set to go into effect on December 1, 2016.

As you aware, following a notice and comment period, the U.S. Department of Labor issued a Final Rule regarding the so-called “white collar” overtime exemptions. The rule, set to go into effect on December 1, 2016, increased the required salary level for the executive, administrative and professional exemptions to the Fair Labor Standard Act’s overtime requirements. Specifically, the rule increased the mandatory salary level from $455 per week ($23,660 annually) to $913 per week ($47,476 annually).

On October 12, 2016, Texas and twenty other states challenged the rule via an emergency motion for preliminary injunctive relief to halt implementation of the rule. The Plano Chamber of Commerce and more than fifty other business organizations filed their own lawsuit that was later joined with the states’ lawsuit for purposes of the motion for preliminary injunction.

As previously stated, the Court granted the states’ motion and issued a preliminary injunction. The Court issued the injunction on a nationwide basis and ordered that the final rule outlined above could not go into effect until further order of the Court. The Court found that the states satisfied the elements necessary to receive a preliminary injunction – (1) a substantial likelihood of success on the merits of the underlying action, (2) irreparable harm, (3) the threatened injury outweighs any damage caused by the injunction and (4) the injunction will not disserve the public interest. With respect to the first element, the Court found that Congress’ intent was clear that the “white collar” exemptions applied to employees “doing actual executive, administrative, and professional duties” and that the exemptions did not include a minimum salary level. Thus, according to the Court, the exemption depends on an employee’s duties, not the employee’s salary. As such, the Court found a substantial likelihood of success on the merits. The Court also found the states satisfied the remaining three elements.

What This Means

As a result of the Court’s order, the current “white collar” exemptions ARE NOT changing until further order from the Court. This means the executive, administrative and professional exemptions will retain their $455 per week ($23,660 annually) salary requirement.

While legal results and legislation can never truly be predicted, it is a safe bet that the “white collar” exemptions will remain unchanged for the foreseeable future. This is so because as of January 20, 2017, the Republicans will control the House of Representatives, Senate and the White House and as a party, they are opposed to the changes. As such, unless Judge Mazzant decides the merits of this case between now and January 20, 2017, the preliminary injunction will remain in effect and a Trump Administration likely will decide to abandon further pursuit of this action.

What Employers Should Do Now

For employers that took no action in response to the previous impending changes, there is nothing to do. For those that took action to prepare, they potentially now must take action.

Every employer’s situation is different and we encourage you to contact your legal counsel to discuss your specific situation. If you raised salaries to maintain the exemptions, you must determine if you now wish to lower those salaries to their previously set levels. There is no legal prohibition that prevents you from doing so but you must determine if it is the right decision for you based on morale and employee engagement.

If you did not raise salaries but instead transitioned previously exempt employees to non-exempt status, you can and should switch them back to exempt status (although there is no requirement to do so). As a side note, it is never a bad thing if an exempt employee tracks their time so you can make a determination as to whether you want to continue that requirement.

These are just a few scenarios you might be facing as a result of this recent Court order. As we said, because of the specifics of each employer’s situation, you should contact your legal counsel to discuss any questions or concerns you may have.

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