In a surprising decision, late Tuesday afternoon a U.S. District Court in Texas granted a nationwide preliminary injunction against implementation of the U.S. Department of Labor’s (DOL) new overtime pay regulations until further order of the court.  The regulations were scheduled to go into effect on December 1, 2016. 

Court Decision

A number of states and business groups recently filed suit to block the new rules, which essentially doubled the minimum salary for the main exemptions from overtime pay under the federal Fair Labor Standards Act and established an automatic increase to the threshold every three years. 

In granting the injunction, the court ruled that the plaintiffs (1) established a substantial likelihood of success on the merits of proving that the DOL overstepped its authority in issuing the regulations, and (2) would be irreparably harmed if the regulations were not put on hold pending a full hearing.

Impact on Employers

The immediate impact of the decision is that employers do not have to comply with the new salary threshold by December 1.  But employers should be aware that the preliminary injunction only delays the effective date of the new regulations until the court makes a final determination on the merits, or until an appeals court, Congress, or the Obama (before January 20, 2017) or Trump (after that date) administration takes further action. 

In the meantime:

• Many employers have already communicated and implemented the changes required by the new regulations (for example, re-classifying some employees as non-exempt and raising the pay of others). These employers may find it difficult to roll the changes back and may wait to see what ultimately happens with the regulations before deciding what to do next.

• Employers who have not yet implemented changes to comply with the new regulations can hold off on making them for the time being.

• Employers who have not yet implemented the changes but who have communicated to employees that adjustments were on the way may let employees know that the expected changes will be delayed pending further developments.