Late in the afternoon on November 22, Judge Amos Mazzant of the U.S. District Court in Sherman, Texas issued an order granting an injunction which will at least delay and possibly derail the changes to the overtime rules under the Fair Labor Standards Act (FLSA), which are scheduled to go into effect on December 1.

Twenty-one states filed an emergency motion for a preliminary injunction in October to halt the rule. They claimed that the DOL exceeded its authority by raising the salary threshold too high and by providing for automatic adjustments to the threshold every three years.

The states’ case was consolidated last month with another lawsuit filed by the U.S. Chamber of Commerce and other business groups, which raised similar objections to the rule.

The court found, on a preliminary basis, that Congress intended for the classification of executive, administrative, and professional employees under the FLSA to be determined with regard to duties, and not solely based on a minimum salary level test. The court found that the new overtime rule, with its increase in the salary level test to $913 per week, will render millions of employees ineligible for the EAP exemption without regard to their job duties, in violation of Congress’s intent. The court likewise took issue with the new rule’s automatic triennial increase to the salary level test.

The court referred to the injunction as a means of maintaining the status quo while it took sufficient time to make a final determination on the issue of whether the USDOL had the authority to promulgate the rule as well as whether the rule is valid. Unfortunately, many businesses have already implemented the changes which would have been required for compliance.

Employers are undoubtedly asking what they should do now and what happens next. Some suggestions:

• If you procrastinated and have not made the changes or informed employees of your intended changes, do nothing for now. Time will tell whether the rule will remain, be modified or revert to the current rule.
• If you have made the changes or have notified employees of new classifications or new pay rates, stay the course. Taking away pay increases now will not only affect employee morale, it could lead to wage and hour complaints, especially if part of the reason for reclassification was that the employees did not meet the duties tests which were NOT changed by the new regulation.
• If during this process, you have discovered that you have misclassified employees based on the duties test, make the changes anyway. If employees should be non-exempt based on their duties, now is the best time to make it right.

As far as what the future holds, it is hard to say. The court could make a decision between now and December 1 or it might delay even longer. Once that decision is made, the issue could end up before the US Supreme Court, which still has only eight members. If nothing is done between now and January 20, the new administration could decide not to defend the rule promulgated by the DOL, an arm of the federal government.

If employers find themselves in a quandary our FLSA Task Force is available to assist. Contact us at FLSA@mclane.com.