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Federal Court Blocks New Department of Labor Overtime Regulations


On November 22, 2016, a federal district court in Texas issued a nationwide preliminary injunction blocking the new DOL overtime regulations that were set to take effect on December 1st of this year. And while this fight is far from over, it does effectively put on hold implementation of the regulations.

Under the DOL’s new regulations, the minimum salary level for most white collar employees would increase to $913 per week, or $47,476 per year — about twice the current minimum ($455/$23,660).  Additionally, the minimum salary for the “highly compensated” employee exemption would have increased to $134,000 annually. The new regulations also allowed employers to use certain bonus and incentive payments to account for up to 10 percent of the new salary level, and contained a mechanism for automatic increases of the minimum salary every three years.

On Tuesday, November 22, 2016 – about a week before the rules would have become effective – Judge Amos L. Mazzant, of the U.S. District Court for the Eastern District of Texas, determined that the DOL had exceeded its statutory authority by maintaining a minimum salary requirement as one of the criteria for certain of the white collar exemptions, even though the regulations have had some minimum threshold since inception. The Court issued a nationwide injunction finding that it “protects both employees and employers” so as not to be subject to different exemptions based on location.  In reaching this conclusion, the Court also held the DOL did not have the authority to implement an automatic update to increase the salary level every three years.

While many employers have prepared for and in many cases started to implement changes based on the new DOL regulations, the Court’s ruling effectively delays implementation.  The injunction is only a preliminary ruling, and it is too early to tell how this will ultimately play out.  If the DOL appeals the ruling, the appeal would be heard by the Fifth Circuit Court of appeals.   If the appeal is still pending when the Trump administration takes office in January, the DOL may abandon the appeal. Congress may also try again to pass legislation overturning the rules or further delaying their implementation. Given the changing political landscape, it is difficult to know whether the DOL rules will ever become effective.  It is certain, however, that the rule will no longer be effective on December 1, 2016.

Employers who already made changes to comply with the DOL regulations should consult with counsel before deciding whether and how to undo these changes.  All other employers should continue to monitor the status of these regulations, which may – or may not – become effective at a later date.