Court’s Decision on Overtime Rule Expected Soon

Allen Smith, J.D. By Allen Smith, J.D. November 17, 2016

[Editor's note: A federal district court has granted a preliminary injunction blocking the overtime rule from taking effect Dec. 1.]

A Nov. 16 hearing on whether the overtime rule should be temporarily barred shouldn't prevent employers from complying with the rule by its scheduled effective date—Dec. 1.

While the U.S. District Court for the Eastern District of Texas is expected to issue a decision soon—probably Nov.  22—on the motion for a nationwide injunction to delay the rule's implementation, "Businesses should be prepared to comply with the regulation as written given the approaching effective date," said Jim Swartz, an attorney with Polsinelli in Atlanta.

"Judge [Amos] Mazzant, the President Obama-appointed presiding United States district judge, reportedly said during the hearing today that he will not consider what the president-elect [Donald Trump] will do with the rule; he is focused on the legality of the regulation before him," Swartz added.

Plaintiffs' Claims

The 21 states challenging the overtime rule argue that the Department of Labor (DOL) did not have the authority under the Fair Labor Standards Act (FLSA) to set a salary level for exempt employees, noted Wendy Stryker, an attorney with Frankfurt Kurnit Klein & Selz in New York City. The exempt salary threshold more than doubled from $23,660 to $47,476.

[SHRM members-only toolkit: Calculating Overtime Pay in the United States]

The states also maintained that the revised rule's automatic triennial increase violated the Administrative Procedure Act's notice-and-comment regulations. And they maintain that the rule violates the 10th Amendment by invading states' sovereign authority to enter into employment agreements, Swartz said.

The business groups suing over the rule, led by the U.S. Chamber of Commerce, argued that the degree of the increase violated the FLSA, rather than challenging the DOL's authority to raise the salary-level threshold. Like the states, the groups also maintained that the automatic increase was unlawful.

The states are seeking an emergency motion to temporarily prevent the rule from taking effect. The business groups asked for an expedited ruling on their claims that the department exceeded its authority. The lawsuits have been consolidated.

While the states' motion for preliminary injunction was heard today, the court also has scheduled, if necessary, a hearing for Nov. 28 on the business groups' expedited summary judgment motion.

A ruling on the preliminary injunction motion is expected by Nov. 22, according to Steven Whitehead, an attorney with Taylor English in Atlanta. If the motion is denied, there will be the hearing on Nov. 28, he noted.

'Coin Flip'

"An injunction is an extraordinary remedy, and the standards which must be met are quite high," said Tim Garrett, an attorney with Bass Berry & Sims in Nashville, Tenn. "Thus, I do not believe the court will grant the injunction requested."

But Whitehead described the chances of an injunction being issued as "a coin flip." He said, "Salary alone cannot be a basis for a determination on exempt status. That is in effect what the salary test adopted by the DOL has done." But, he added, "The DOL enjoys significant deference in its interpretation of the FLSA."

FLSA Overtime Rule Compliance

For more overtime compliance news, tips and tools, check out the SHRM resources provided below:

· FLSA Overtime Rule Resources Guide
· Compliance Checklist· Infographic

The new regulations are arguably contrary to the FLSA because they exclude large numbers of people Congress intended to include within the scope of the executive, administrative and professional exemptions, noted Paul DeCamp, an attorney with Jackson Lewis in Reston, Va.

"The conventional wisdom is that the attack on the triennial indexing is the strongest legal argument," said Robert Boonin, an attorney with Dykema in Detroit. "But if that turns out to be the court's primary concern, then an injunction is unlikely since that issue won't surface for another three years."
On the other hand, he said an injunction might be issued on the states' constitutional issues alone.

Courts can be unpredictable, though, and if the court does rule in favor of the business groups challenging the rule, the rationale may be because the court thinks that it would be "extremely difficult for businesses to roll back their actions taken to conform to the new regulations," Boonin observed. Still, while judicial relief is "possible," he added,  it is "far from assured."

Alfred Robinson Jr., an attorney with Ogletree Deakins in Washington, D.C., agreed, saying that how the court will act is "next to impossible to predict."

Keep Compliance a Priority

Boonin recommended that employers "keep their feet on the gas pedal and prepare for the regulations to become effective on Dec. 1." He added that if employers act as if judicial relief will occur and it doesn't, they will have to rush to conform, "and rushing will mean that mistakes will be made or details will be missed."

Garrett agreed, saying, "We would advise that employers continue to plan to comply with the new rule effective Dec. 1, unless the court does impose a nationwide injunction." He added, "The risks of failing to comply are simply too great and can lead to immediate legal exposure."

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