In a surprising decision issued yesterday, November 22, 2016, a federal judge for the U.S. District Court for the Eastern District of Texas granted a preliminary injunction, effectively barring the Federal Department of Labor (DOL) from enforcing on a nationwide basis the Final Overtime Rule set to take effect on December 1, 2016.

Originally, lawsuits had been filed by twenty-one states’ attorneys general, as well a group of over fifty business organizations (including trade associations and chambers of commerce) challenging the Final Rule.  The lawsuits were consolidated by the judge and oral arguments were heard on November 16th.

The Plaintiffs’ arguments challenged the Final Rule’s lawfulness, the authority of the DOL to promulgate it, and whether the automatic updating mechanism in the Final Rule complies with the Administrative Procedures Act requirements.  They argued that the significant cost of complying with the Final Rule will cause them irreparable injury, some states claiming it will cost them millions of dollars to comply in the first year alone.

The Court pointed out that nothing in the exemptions from the FLSA overtime requirements for “white collar employees” (those employed in bona fide executive, administrative and professional duties) contain any indication that Congress intended the DOL to define a specific minimum salary threshold.  The broad purpose of the statute was to exempt employees engaged in “white collar” duties without regard to level of pay.

Thus, the Court determined that the DOL exceeded its delegated authority by essentially creating a salary-only test, causing an estimated 4.2 million employees to become eligible for overtime under the new Final Rule without a change to their tasks and duties.

The DOL will likely appeal this decision quickly, but as of now it is uncertain when it may do so.  The unique timing of this ruling has employers scrambling to understand their compliance obligations.

For now, employers should adopt a “wait and see” approach, and any changes they have made could be kept in place for now  – especially if making quick changes would be disruptive to the workforce.  Organizations that have not yet implemented personnel changes or increases to salaries can feel reasonably comfortable about delaying changes until further information about the status of the Final Rule becomes known.

Have more questions? Contact Lynn Jackson Employment Law Practice Group Leader, Jennifer Suich Frank.