/ Published in Corporate & Tax, Labor & Employment

Employment Law: Changing Requirements for White Collar Overtime Exemption on Hold

Introduction

As we told you earlier, the general rule for the white collar overtime exemption was subject to an overhaul this year, with the changes scheduled to go into effect December 1, 2016.  Specifically, the minimum salary level for exempt employees was scheduled to rise from $455 per week, or $23,660 annually, to $921 per week, or $47,892 annually.  The new rule also allowed for salary adjustments every three years.  

Legal Posture

On Tuesday, November 22, 2016, U. S. District Judge Amos Mazzant II issued a preliminary injunction in response to an Emergency Motion for same filed by the State of Nevada and 20 other states.  

In their Emergency Motion for a Preliminary Injunction, the states questioned the lawfulness of the Final Rule, whether the Department of Labor had the authority to promulgate the rule, and whether the automatic update provision complied with certain requirements.  

Preliminary injunctions are fairly rare.  In order to prevail on a motion for a preliminary injunction, the plaintiffs must establish four things, as follows:

  • There is a substantial likelihood of success on the merits;
  • There is a substantial threat to the plaintiffs that they will suffer irreparable harm without the injunction;
  • That the injury threatened outweighs the damage that might be caused by an injunction; and
  • That the injunction does not disserve the public interests.

Likelihood of Success on the Merits

After an analysis of the statutory language governing the white collar overtime exemption, the Court ruled that Congress, not the Department, has the authority to make determinations about raising the minimum salary level.  Consequently, the Court found the plaintiffs would likely be successful on the merits.

Substantial Threat of Irreparable Harm

The plaintiffs argued the implementation of the law would have irreparable harm on the states.  They offered, for example, the state of Kansas’ Department of Children and Families, and the Department of Corrections, both of which had over 50% of their employees affected by the rule.  Plaintiff argued, and the Court agreed, that the budget constraints of these departments were such that they would not be able to increase salaries per the law.  This could lead to lay-offs, which would impact public safety considerations.

Balancing the Injury Against Potential Damage Caused by the Injunction

Plaintiffs argue the substantial sums that would be spent under the rule would not be recoverable if the rule went into effect.  They also argue the rule could impact government services, would cause administrative disruptions, would result in employee reclassifications or terminations, and general harm to the public.  The Court notes that there is little to no harm to the defendant if the rule is delayed, and thus finds on balance, the plaintiffs’ potential injuries tip the scale in favor of the plaintiff.

The Public Interest

The Court noted that due to the rapidly approaching effective date, the Court did not have time to “render a meaningful decision on the merits.”  Because of this, a preliminary injunction would provide the Court the time to review the case more completely.

Conclusion

In light of the above, the Court has issued a nation-wide injunction, prohibiting the implementation and enforcement of the modifications to the white collar overtime exemptions.  

Of course, we at General Counsel, PC will keep you apprised of new developments as they occur.  

You can read the court’s decision in its entirety here.