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New Overtime Rule Blocked By Federal Court

By Chase M. Patterson

On November 22, 2016, a federal judge in the District Court for the Eastern District of Texas issued a nationwide preliminary injunction blocking the U.S. Department of Labor’s new rule establishing higher minimum salary limits for exempt white collared employees.  The new rule, which was set to take effect December 1, 2016, would have more than doubled the minimum salary for professional, executive and administrative employees from $23,660 annually to $47,476 annually.  The new rule also established a mechanism for automatically updating salary and compensation levels every three years.

Twenty-one states filed a lawsuit to challenge the new rule’s validity and sought an emergency preliminary injunction to prevent the rule change.  In granting the nationwide injunction, the Court determined there was a likelihood of success on the merits that the new rule was invalid.  The Court’s granting of the injunction prevents the new rule from going into effect on December 1, 2016.  Until the Court lifts the injunction or its ruling is overturned on appeal, employers are not required to comply with the new overtime rule.

Practical Takeaways:

Many employers have already taken steps to comply with the new rule or were in the process of doing so.  These employers may continue to move forward with these changes or decide to postpone or eliminate any updated payroll policies.  Employers will need to consider both business and employee relations when determining whether to roll back any recent changes to payroll policies and practices.

Finally, the current injunction is temporary and may be changed by the Court.  The Department of Labor may also consider appealing, which could potentially overturn the temporary injunction.  Any appeal could be further complicated by the incoming Trump administration that may decide to not challenge the injunction.

The bottom line is that employers will not be required to comply with the new overtime rule on December 1, 2016.  However, employers should be prepared to quickly comply with the new rule in the event the Court’s temporary injunction is changed or overruled.  Employers should continue to monitor the Court’s final decision and any congressional or administrative action in the coming weeks.

Mr. Patterson concentrates his practice on labor and employment law and business and corporate law.  He joined DeFur Voran LLP in November 2016 and serves clients in the Indianapolis area, Lafayette, and Muncie.