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Breaking News: Federal Court Blocks New Overtime Rule

on Wednesday, 23 November 2016 in Labor & Employment Law Update: Sarah M. Huyck, Editor

On November 22, 2016, a federal judge blocked the new federal overtime rule that would have made more workers eligible for overtime pay beginning December 1, 2016.

U.S. District Judge Amos L. Mazzant, III of the Eastern District of Texas (an Obama judicial appointee) entered a nationwide preliminary injunction blocking the U.S. Department of Labor (“DOL”) from implementing the rule, which focused primarily on increasing the salary levels needed for Executive, Administrative and Professional workers to be exempt. Specifically, the new rule more than doubled the required minimum salary level for employees exempt from overtime, from the current $455 per week to $913 (or $23,660 annually to $47,476).

The case, State of Nevada v. United States Department of Labor, was brought by 21 states (Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, Nevada, New Mexico, Ohio, Oklahoma, South Carolina, Texas, Utah and Wisconsin). The plaintiff-states argued that the DOL did not have the statutory authority to set the salary level. Judge Mazzant agreed. A copy of his Memorandum Opinion and Order may be found here.

Only time will tell whether this preliminary injunction will become permanent. It may be appealed by the DOL to the Fifth Circuit Court of Appeals. If the injunction is reversed at the first level of appeal (which is unlikely considering the conservative nature of the Fifth Circuit), it will likely be appealed by the plaintiff-states to the U.S. Supreme Court (which by that time may have a conservative majority). The risk for an employer along the way is that if the rule is ultimately upheld and the employer was not in compliance as of December 1, then the employer may be liable for overtime compensation following December 1. Even under that scenario, an employer may be able to argue successfully that it acted in reliance on Judge Mazzant’s injunction and should not be liable for unpaid overtime compensation. Practically, however, many employers will gamble that neither the Fifth Circuit nor the U.S. Supreme Court will reverse the injunction. Furthermore, Congress may vote to override the new rule and the new Trump Administration will almost certainly not veto such legislation. And of course, the Trump Administration may also determine that it will withdraw the rule or discontinue any pending appeal of Judge Mazzant’s order.

As always, we will continue to keep you posted regarding significant developments.

R.J. (Randy) Stevenson

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