A Texas court has issued a nationwide preliminary injunction stopping implementation of the Department of Labor’s (DOL) rule to more than double the current salary threshold for certain exemptions from overtime pay.
The court ruled on November 22, just a few days before its December 1, 2016 implementation date.
The court ruling came in response to lawsuits filed by 21 states, the U.S. Chamber of Commerce, and other business groups. The plaintiffs argued that the DOL exceeded its statutory authority in raising the salary threshold and by providing for the automatic adjustment of the threshold every three years.
- The DOL rule would raise the salary threshold from $23,660 to $47,476 annually, more than doubling the minimum annual salary a worker can earn and qualify for an exemption from the overtime pay provisions of the Fair Labor Standards Act.
- DOL’s rule would also adjust the threshold every three years based on the 40th percentile of wages for full-time salaried workers in the lowest wage earning geographic area captured by the U.S. Census.
The preliminary injunction issued by the court cites concerns that the rule improperly created a salary test that would consume Congressional intent that the exemption be based on the type of duties performed. Additionally, the court found merit in plaintiffs’ argument that states would be irreparably harmed by implementation of the rule before a final decision by the court because states facing budget restraints would have to expend a substantial sum of unrecoverable public funds to increase salaries or pay overtime to employees and may possibly have to layoff or reorganize workforces causing a substantial interference in government services.
A preliminary injunction is not permanent, but it does preserve the current rule while the court deliberates the merits of the case. As a result, the new rule will not take effect on December 1, 2016, and employers may continue to classify employees as exempt if they pay employees at least $23,660 annually on a salary basis and if the employees meet the appropriate duties test.
DOL’s rule could still become effective if the Texas court does not issue a permanent injunction or otherwise rule against the DOL. The Labor Department is expected to challenge the ruling.
Because the preliminary injunction could be lifted on short notice, legal experts advise that employers should continue to prepare for changes called for in DOL’s rule.
Critical preparation considerations are discussed by the Piliero Mazza law firm at: http://www.pilieromazza.com/blog/far-reaching-impact-of-dols-increase-to-flsa-salary-thresholds
