Federal Judge Blocks FLSA Overtime Rule Change Previously Set to Go into Effect December 1st

A federal judge in Texas has granted a nationwide injunction that temporarily halts the new federal overtime rule change that was set to go into effect on December 1st. This ruling is big news for many ministries who have been preparing for how to deal with the expected change. Telios Law presents this special ministry update with information on the Court’s ruling, as well as information on what this means for your ministry.

As we previously reported, the new rule was set to raise the salary threshold for who could be considered “exempt” from the Fair Labor Standards Act (FLSA)’s overtime mandate. As a general matter, in order for an employee to be exempt from overtime, the employee must perform certain duties (which is a requirement of the statute itself) and be paid a certain salary (which is a requirement based on Department of Labor regulations). Beginning December 1st, the salary threshold was set to increase from $455 per week/$23,660 per year to $913 per week/$47,476 per year. It was then set to continue to increase automatically every three years. Practically, this would have made anyone earning a salary of less than the threshold eligible for overtime, regardless of whether they met the duties test. The rule change was expected to have massive implications for multiple industries, extending overtime coverage to an estimated $4.2 million workers across the nation. Nonprofits were particularly affected.

But yesterday, a federal judge in Texas decided that the rule simply went too far. Twenty-one States had filed a lawsuit, arguing that the Department of Labor (DOL) had exceeded its authority when it enacted the new rule. The lawsuit requested an emergency injunction that would apply to the entire country.

Judge Amos Louis Mazzant—an Obama appointee—agreed with the States. In a 20-page order, the Court remarked that the DOL had exceeded “its delegated authority and ignored Congress’s intent by raising the minimum salary level such that it supplants the duties test.” Congress, the Court explained, intended the executive, administrative, and professional exemptions to depend on an employee’s duties rather than an employee’s salary. The fact that the salary thresholds in the new rule were so high made the duties test—the only actual requirement in the statute for whether an employee is exempt from FLSA—essentially irrelevant and created what the Court called “a de facto salary-only test.” If Congress wanted this to be the case, it would be Congress’s prerogative to do so, not the Department’s. For these reasons, the final rule was unlawful.

Because the Court found the rule to be unlawful, it also concluded that the DOL lacked authority to implement the automatic increases of the salary threshold every three years.

What Does this Mean for Your Ministry?

As a result of the injunction, the new overtime rule is barred from going into effect on December 1st. This means that employers do not have to comply with its mandate as long as the injunction remains in effect. For employers who were not quite ready for the new law to take effect and hadn’t implemented changes, you can breathe a sigh of relief, at least for now. For those that had already shifted course to prepare, you may consider whether to hold off on implementing those changes, or choose to go full-speed ahead as if the rule is still in play.

While the rule is blocked for now, be cautious in making your ultimate decision. Because the injunction is only temporary, and the Department may appeal, the rule may become operative again at some point in time. (This would also depend on whatever position the new administration takes.) Or, the rule could be barred permanently. Because of this uncertainty, each individual situation may need to be discussed with legal counsel.

Lawyers at Telios Law will continue to monitor this important change in the law, and, as always, are standing by to provide our clients with assistance regarding FLSA compliance and other employment related needs.

The case is Nevada v. U.S. Department of Labor, No. 4:16-CV-00731 (E.D. Tex. Nov. 22, 2016).