Client Alert: Update on Stalled Federal Overtime Exemption Rule Changes

CLIENT ALERT

by 

James P. Reidy and Mark J. Ventola


In a ruling issued on November 22, 2016, a Federal District Court Judge in Texas blocked implementation of the U.S. Department of Labor’s amendments to the overtime exemption rules under federal wage law. Before that injunction was issued, covered employers were scrambling to make changes to their pay classifications and payroll practices as the changes were scheduled to go into effect on December 1, 2016. Since then, and with the changes promised by the incoming Trump administration and new Congress, many employers have wondered if that reprieve was merely temporary or if it would turn out to be permanent.

The answer may come soon as the briefs from all sides to the appeal are due in to the 5th Circuit Court of Appeals by January 31st and oral argument should be scheduled in the coming weeks. A decision should follow within a few months after the oral argument.

By way of background, the Texas lawsuit, brought by 21 States, the United States Chambers of Commerce, and other business organizations, claims that the Department of Labor’s amendments to the existing “white collar” exemptions violated States’ Constitutional rights and also side-stepped proper means for adopting and implementing Federal regulations. The Federal Court in Texas agreed, and issued a nationwide injunction blocking implementation across the country. Thereafter, the U.S. Department of Labor filed an appeal challenging the injunction and arguing that the changes were proper and should go into effect.

At this point, it is unclear what the new President, Congress, and the Department of Labor will do regarding these changes. There is concern that the new administration will direct the DOL to drop its appeal, and allow the injunction to stand. To address that concern, several labor unions have obtained approval to join the case and will, apparently, proceed with the appeal, of the DOL does not.

Obviously, this story is still far from over, and the final fate of this rule will be in doubt for at least a few more months. In the meantime employers that had reviewed their payroll practices and planned salary increases, employee reclassifications, or other strategies for addressing what would have been a significant change in the law, are still advised to hold off, and stay tuned until this case has run the full course of appeals or until the White House or Congress acts.

Of course, we are here to help you through this uncertain time, and would be glad to work with you to develop a strategy for proceeding.

 

James P. Reidy and Mark J. Ventola are shareholders at Sheehan Phinney Bass & Green. They are Co-Chairs of the firm’s Labor, Employment and Employee Benefits Group.

This article is intended to serve as a summary of the issues outlined herein. While it may include some general guidance, it is not intended as, nor is it a substitute for, legal advice.