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Texas Court Halts Implementation of New Overtime Regulations

Posted By Unemployment Services Trust (UST), Wednesday, December 7, 2016

On May 23, 2016, the Department of Labor (DOL) issued updated regulations regarding the white collar exemptions to the Fair Labor Standards Act (FLSA) overtime requirements. The updated regulations, which were originally scheduled to take effect on December 1, 2016, would more than double the minimum salary requirement from $23,660 to $47,476 for certain executive, administrative, and professional employees in order to be exempt from overtime.

This past September a group of 21 states, led by Texas and Nevada, filed a lawsuit in the U.S. District Court for the Eastern District of Texas challenging the updated regulations, arguing that the DOL did not have the authority to require that employers offer overtime to workers who earn below a certain amount. This suit was consolidated with another suit brought by the U.S. Chamber of Commerce and other business groups also challenging the regulations.

On November 22, 2016, U.S. District Court Judge Amos Mazzant granted an Emergency Motion for Preliminary Injunction, which had been filed by the plaintiff states. The preliminary injunction blocks the DOL from implementing and enforcing the new regulations. Employers should note that this is only a temporary injunction, not a permanent one. The injunction applies nationwide and simply prevents the regulations from going into effect on December 1.

Once again, as this is a preliminary injunction, Judge Mazzant will be making a final decision on the actual merits of the case in the near future. If the decision goes against the DOL, we expect them to appeal to the U.S. Court of Appeals for the Fifth Circuit, so it’s likely that employers and regulators will be revisiting the regulations in the future.

Impact on Employers

For many employers, this is a welcome, albeit temporary reprieve. As a result, employers that have not made the necessary changes to their compensation plans have more time to plan for the changes in the event the regulations are upheld. Employers should not assume that the overtime rule is permanently cancelled.

  • Those employers that have already made changes to their compensation plans and have communicated those changes to their employees will most likely choose to leave those changes in place.
  • Employers that were struggling with making changes by either reclassifying employees to nonexempt overtime-eligible status or raising compensation to the proposed threshold in order to maintain exemption should consider to weigh their options pending future legal developments.
  • Employers that are considering rolling back any changes previously communicated should carefully review the potential employee relations issues that the change in direction may cause.

These decisions should be made in accordance with any applicable state or local laws. Employers should consult their employment attorney to determine what course of action is best for them.

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