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UPDATE: The Department Of Labor Appeals Federal Court Ruling Blocking New Overtime Regulations

On November 22, 2016, a federal court issued a nationwide injunction blocking an administrative regulation that would have extended overtime pay to 4.2 million salaried workers.

On June 20, 2016, we blogged about a new Department of Labor rule that would have doubled the salary threshold – from $23,660 to $47,476 per year – that an employee can earn while still remaining eligible for overtime pay under the Fair Labor Standards Act of 1938 (“FLSA”). To read that blog, please click here. On November 22, 2016, a federal judge agreed with 21 states and a coalition of business groups that this rule, which would have taken effect on December 1, 2016, was unlawful and blocked it from going into effect.

Specifically, the FLSA exempts from overtime protection, “any employee employed in a bona fide executive, administrative, or professional capacity.” 29 U.S.C. § 213(a)(1). The federal district court found that “Congress intended [for this] exemption to apply [solely] to employees doing actual executive, administrative, and professional duties [. . .] which does not include a minimum salary level.” By raising the minimum salary level by such a dramatic level, to $913 per week, the federal district court found that the Department of Labor replaced this duties test with “a de facto salary-only test” – in direct conflict with congressional intent.

The ruling throws into chaos the Department of Labor’s new overtime regulations. While the decision came before the effective date of the regulations, many employers already raised employee salaries to avoid the new overtime regulations, creating difficult practical and morale issues involved in revoking promised pay raises on the eve of the holiday season.

On December 1, 2016, the Department of Labor appealed the federal court’s decision blocking the administrative regulation and requested an expedited briefing schedule. Briefing must be completed by January 31, 2017. The Fifth Circuit indicated that it would schedule oral argument for the first available sitting after the close of briefing. However, this schedule allows the incoming administration to abandon the appeal if it so chooses.

McGown & Markling will continue to monitor this important issue as it develops. Please check back with our website for regular blog updates.

To read the Fact Sheet about the federal district decision, please click here.

Authors: Matthew John Markling and Patrick Vrobel

Note: This blog entry does not constitute – nor does it contain – legal advice. Legal jurisprudence is like the always changing Midwestern weather. As a result, this single blog entry cannot substitute for consultation with a McGown & Markling attorney. If legal advice is needed with respect to a specific factual situation, please feel free to contact a McGown & Markling attorney.

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