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Client Alert: Federal Court Issues Emergency Injunction Blocking Changes To Overtime Exemption Rule - 11/23/2016

We have previously reported on the U.S. Department of Labor's ("DOL") enactment of changes to the so-called "white collar exemptions" to federal overtime rules. The DOL's final rule implementing these changes was set to go into effect December 1, 2016. The DOL's changes to the rule would have raised the minimum salary level an employee must make to be considered exempt from overtime.

On November 22, 2016, a federal judge for the Untied States District Court of the Eastern District of Texas (Sherman) issued an emergency preliminary injunction blocking implementation of the DOL's rule. Judge Amos L. Mazzant III agreed with twenty-one states (including Alabama), the United States Chamber of Commerce, and other business groups who filed lawsuits challenging the rule, holding that the DOL exceeded its authority under the Fair Labor Standards Act and acted contrary to Congress's intent by determining eligibility for the overtime exemption based on minimum salary level, rather than a duties test. Likewise, the Court held that the provision of the DOL's rule that automatically adjusted the minimum salary threshold level every three years was also unlawful. Importantly, the court's injunction applies nationwide.

As of now, the DOL's new rules for determining which employees are exempt under the "white collar exemptions" will not go into effect on December 1. However, this is a preliminary ruling that will be appealed. The ultimate outcome could be different. The new salary level may still go into effect as of a date after December 1. The Trump administration and the new Republican Congress may also take action. We will continue to keep you advised.

If you are an employer who had planned to implement changes effective December 1, you can now delay those changes.  For employers who have waited to the last minute, you win.  You have been given an indefinite extension.  The proactive employers who like to be a step ahead and have already implemented changes may feel punished for their diligence.  They may be in a quandary as to what they should do now.  Our labor and employment lawyers are available to advise on the particulars of your workforce.

Written by attorneys Trip Umbach & Chris Vinson