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Attorneys say several factors could affect the decision’s timing and outcome
Employers know by now that the
federal overtime rule has been put on hold, but the future of the rule remains uncertain.
The Department of Labor's (DOL's) rule would have raised the Fair Labor Standards Act's (FLSA's) salary threshold for exemption from overtime pay from $23,660 to $47,476 beginning on Dec. 1. But a federal district court granted a preliminary injunction that blocked the rule the week before its effective date.
For more overtime compliance news, tips and tools, check out the SHRM resources provided below:
For now, that means the existing overtime rules will remain in place, and
employers can decide whether it makes sense for them to roll out any planned changes.
Although the injunction is temporary, it isn't clear when a final decision will be reached because many factors could influence the outcome of the legal challenge to the rule.
The district court judge hasn't made a final ruling on the merits of the case, and the DOL could appeal the injunction decision to the 5th U.S. Circuit Court of Appeals. However, the incoming administration could also decide it won't defend the rule.
[Update: On Dec. 1, the DOL appealed the decision to the 5th Circuit.]
"We will almost certainly know what will happen next soon after Jan. 20, unless the DOL is successful in winning an expedited appeal before inauguration day," said Brett Bartlett, an attorney with Seyfarth Shaw in Atlanta. "All businesses should keep their ears to the ground because changes are happening fast around all of this."
District Court Case
The case started as two separate lawsuits, explained Brett Coburn, an attorney with Alston & Bird in Atlanta. One was brought by a number of states, and the other was brought by the U.S. Chamber of Commerce and several other business groups.
Although the arguments were slightly different in the two cases, they each asserted that the DOL exceeded its authority by doubling the exempt salary threshold.
Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas
combined the two cases and then granted the states' emergency motion for a preliminary injunction, which prevented the overtime rule from taking effect on Dec. 1.
"The argument that ultimately won the day was that the DOL overreached by shifting too far away from the FLSA's duties test and putting too much emphasis on the salary threshold," Coburn said. In the judge's view, the rule just went too far—if there were smaller, incremental increases to the salary threshold there might not have been a challenge or the judge might have ruled differently.
[SHRM members-only toolkit: Calculating Overtime Pay in the United States]
The preliminary injunction will remain in effect for the duration of the case unless the order is appealed to the 5th Circuit and reversed, explained Regina Faul, an attorney with Phillips Nizer in New York City. This type of injunction is generally meant to preserve the status quo pending a final decision in a case, she added.
Prior to the injunction, the business groups had filed a
motion for summary judgment, arguing that the court could deem the rule unlawful based on the administrative record and that a trial wasn't necessary.
Mazzant has yet to hold a hearing or rule on that motion.
The secretary of labor has an immediate right to appeal the ruling to the 5th Circuit, which is traditionally one of the more conservative circuits, Coburn noted.
"In his decision, Judge Mazzant declared that there is no basis in the statute itself for the Department of Labor to create any salary test, though he inconsistently notes in a footnote that his holding does not apply to historic salary level tests—just this new one," said Gerald Hathaway, an attorney with Drinker Biddle in New York City. "And this is the fundamental flaw of the decision."
Mazzant used a 1933 edition of a dictionary to assess what the plain words of the 1938 FLSA meant, he added. "So if the statute was so plain in 1938, which is indeed the core of the judge's holding, then there never was any basis for the DOL to impose a salary test of any kind at any time."
Hathaway said the ruling turns years of how the law has been interpreted on its head, and for that reason, he thinks the case will get the attention of the 5th Circuit.
Attorneys interviewed by SHRM Online agreed that it is impossible to predict how President-elect Donald Trump's administration will handle the rule.
When the overtime rule was first introduced, there were attempts in Congress to block it, Faul said, but members of Congress likely thought that President Barack Obama would veto those bills. She said Congress could attempt to pass legislation again after Trump takes office.
Coburn noted that if the rule had gone into effect as scheduled, some people incorrectly assumed that "Trump could come in on day one and wipe that away." He said that can't happen because of the formal rulemaking process.
"The DOL's ability to maintain integrity in its rulemaking is a significant factor to consider," Bartlett explained. "If the new rules were eviscerated entirely, after having been promulgated on the basis of a lengthy rulemaking process that involved nearly 300,000 public comments, reasonable minds might question whether the next rulemaking should be trusted at all."
"We don't really know what Trump's view is," Coburn said. "He could instruct his secretary of labor to abandon the appeal or to not put up a fight in the district court."
Coburn said that would be the back door way to get the rule off the table without formal rulemaking. "If that plays out, the new rule would be dead and the current rule would stay in place," he added. "We would have to wait and see if Trump's administration creates a new rule or lets it be."
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