Client Alerts

Overtime Regulation Blocked By Nationwide Injunction

By: Mark D. Katz, William D. Edwards, Jeffrey S. Dunlap, Stephanie E. Harley, Stephen A. Markus and Stephanie Dutchess Trudeau

About: Employment & Labor

With the December 1 effective date for the new overtime regulation fast approaching, a U.S. District Court Judge in Texas granted a nationwide injunction preventing its implementation. The Court, acting on a motion filed by twenty-one (21) states and numerous business groups, blocked the Department of Labor regulation which would have substantially raised the minimum salary level needed to be paid in order to qualify for the “white-collar” exemptions.

The Court found that the arguments contra to the regulation had a likelihood of succeeding on the merits and that irreparable harm would occur if the regulation was allowed to become effective. Therefore a nationwide injunction was ordered to preserve “the status quo while the court determines the department’s authority to make the final rule as well as the final rules validity.”

The Court found that while Congress granted authority to the Secretary of Labor to define what constitutes executive, administrative, and professional employees who are exempted from the minimum wage and overtime provisions of the Fair Labor Standards Act, Congress was referring to the duties associated with those positions. Instead, the Secretary in promulgating the new regulation, looked solely to increasing the minimum salary level and that supplanted the duties test and went beyond what Congress delegated to the Secretary.

It is highly unlikely that a final determination on the validity of the Department of Labor’s action will be completed prior to the beginning of the new administration. While nothing is for certain, it is anticipated that the incoming administration will want to study this issue and propose a new regulation on this subject. Therefore, employers should maintain their payroll practices that are presently in effect and wait and see the outcome of the litigation and/or other governmental actions. However, if salary increases were already announced, consideration should be given to the effect reversal or delay would have on employee morale.