Federal Court Enjoins New Overtime Rules

A Texas federal court yesterday blocked the U.S. Department of Labor from implementing and enforcing new overtime regulations that sharply raised the minimum salary requirement for executive, administrative and professional employees to be exempt from overtime pay. As a result, employers need not comply with the regulations, which were scheduled to take effect on Dec. 1.

Ruling in the case of Nevada v. Department of Labor, U.S. District Judge Amos Mazzant for the Eastern District of Texas issued a nationwide injunction barring the DOL from implementing the regulations that would have raised from $23,660 to $47,476 the annual salary threshold for employees to be exempt under the so-called white-collar exemptions from the overtime provisions of the Fair Labor Standards Act. Twenty-one states (including South Carolina) challenged the regulations as exceeding the authority granted to the DOL under the FLSA. In a decision that surprised many authorities, the court held that the DOL’s imposition of a salary threshold violated the intent of Congress as expressed in the plain language of the FLSA; however, the court did not overturn the old regulations, which set an annual salary threshold of $23,660.

The injunction blocking the new rules is effective immediately and will remain in effect indefinitely unless it is reversed on appeal. The DOL is expected to appeal the injunction, and a ruling on appeal may be several months away. If the appeals court reinstitutes the overtime rules, the Trump administration may seek to overturn them.

Many employers have already taken steps – such as raising salaries of exempt white-collar employees or converting exempt employees to nonexempt status – to comply with the new regulations. The court’s order does not require employers to reverse those changes, but it allows employers now to postpone them indefinitely.

Although employers may now revoke or delay planned changes to employee compensation required by the new regulations, business considerations may preclude them from doing so. Where employers have promised salary increases to currently exempt employees so they would meet the new salary threshold, failing to implement such increases may damage employee morale. On the other hand, employers may want to continue treating as exempt from overtime employees who prefer to remain exempt.

For more information regarding the court’s decision and its effect on overtime pay requirements, please contact a member of Robinson Bradshaw’s Employment and Labor Practice Group.