Late yesterday afternoon, a federal district court issued a preliminary injunction blocking the Department of Labor from implementing the new overtime rules set to take effect on December 1, 2016. Specifically, the department’s “Final Rules” included changes to the Fair Labor Standards Act (FLSA) by increasing the minimum earnings threshold for employees to qualify for overtime exemptions from $455 per week to $913 per week. In his ruling, Judge Mazzant stated “that the Department [of Labor’s] salary level under the Final Rule and the automatic updating mechanism are without authority” and enjoined the Department on a nationwide basis from implementing and enforcing the new rules.
This ruling has left employers, who have spent almost a year getting ready for the changes, questioning whether to implement or delay implementation pending a final resolution of these issues. In making this decision, employers need to consider a host of legal and business issues.
While the District Court’s ruling suggests that employers do not need to comply by December 1, 2016, the legal fight is not over and there could be some risk to an employer who does not comply. The Court issued a preliminary injunction, meaning that there will be further proceedings in which the Court could alter its conclusions. Moreover, the Department of Labor already indicated it intends to appeal the District Court ruling. There is a split of legal authority in federal courts on whether the existence of the preliminary injunction precludes any liability between the December 1, 2016, effective date and the date the Court of Appeals issues its decision. Some federal courts have held that an employer cannot be liable for non-compliance while an injunction is pending, while others (including at least one District Court in New York) have held the opposite. Employers need to consult with their legal counsel who can help them assess the risk associated with their decision.
In addition, there are numerous business issues associated with changing course as a result of the District Court’s ruling. Employers that have already advised employees of the upcoming changes need to think carefully about how their decision to implement or delay will be viewed by their employees. Employers should make certain that the message is communicated in a way that does not result in employees feeling as if they are being taken advantage of or are being manipulated. Moreover, for those that choose to implement, they may not be able to unwind this decision in the event that it is later determined that the Court’s determination that the regulations were without authority is upheld.
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Employers who have questions should contact the Gunster employment attorney with whom they work to evaluate these issues.
