2016 Overtime Rule on Permanent Pause After 5th Circuit Halts Litigation

Labor Department starts work on new regulations

Allen Smith, J.D. By Allen Smith, J.D. November 9, 2017
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​The 5th U.S. Circuit Court of Appeals granted a Department of Labor (DOL) motion to halt litigation over the 2016 overtime rule on Nov. 6, making it very unlikely that the rule will ever take effect.

In August, Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas granted summary judgment to business groups challenging the rule and declared the rule invalid. The court held that the rule, which would have more than doubled the salary thresholds for the executive, administrative and professional exemptions, conflicted with the Fair Labor Standards Act and thus was invalid because it included large numbers of individuals Congress intended to be exempt within the overtime pay requirement, explained Paul DeCamp, an attorney with Epstein Becker Green in Washington, D.C.

However, the court acknowledged that the department has the authority to impose a salary threshold, as has been the case since the 1930s, he noted. But the court held that the department exceeded its authority by setting a minimum salary level so high—$47,476 per year—that it would render more than 4 million people nonexempt who are currently performing duties consistent with exempt status.

DOL Wants No Ambiguity

The department appealed the decision and moved for a halt in the litigation "to avoid any ambiguity regarding its authority in this area," DeCamp said. "By appealing the ruling, the department keeps the option open of having the ruling overturned or vacated, therefore potentially removing a precedent that could serve as a basis for challenging the next overtime rule the department issues."

[SHRM members-only toolkit: Determining Overtime Eligibility in the United States]

But while the department can raise the threshold, questions remain about how high it can go. "The district court's decision explains that the current $455 per week salary minimum is permissible but finds that a $913 per week salary minimum is unlawful," noted Laura O'Donnell, an attorney with Haynes and Boone in San Antonio. "It is unclear where in this range the level shifts from OK to too far. The DOL wants to preserve its right to have the 5th Circuit decide that it has the authority to set whatever salary level it ultimately selects."

Moving Forward with New Rulemaking

DeCamp noted that the decision to seek a stay of the appeal reflects the DOL's desire not to have to litigate over the 2016 rule any more, but instead to focus on moving forward with a new rule incorporating a more modest increase in the salary threshold.

"Once the department has issued the new rule, it can seek to have the pending litigation dismissed and the district court's decision vacated on the basis that the litigation has become moot," he said.

"The big picture for employers remains muddled," said Steven Suflas, an attorney with Ballard Spahr in Cherry Hill, N.J., and Denver.

"Many went ahead and implemented changes to their payroll practices in compliance with the 2016 rule, prior to the announcement at the last minute of the district court's injunction" in November 2016.

He noted that it is unlikely those employers will reduce the salary levels of those who were increased to meet the regulatory thresholds. At the same time, he said that the DOL won't enforce the 2016 rule while it goes through its new rulemaking process, begun in July with its request for information.

 

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