New Federal Overtime Rule Blocked by Judge, Faces Uncertain Future

clocksIn May 2016, the U.S. Department of Labor (DOL) issued a new rule that reportedly would have extended overtime pay for millions of workers around the country. Twenty-one U.S. states, led by Nevada, filed suit against the DOL in September to challenge the rule, alleging that it violated provisions of the Fair Labor Standards Act (FLSA), the Administrative Procedures Act (APA), and the U.S. Constitution. State of Nevada et al. v. U.S. Dep’t of Labor et al., No. 4:16-cv-00731, complaint (E.D. Tex., Sep. 20, 2016). A federal judge granted an injunction against the rule in November, temporarily halting its implementation nationwide. An appeal is still pending in the Fifth Circuit as of late January, but a new administration has also moved into the White House. It is not at all clear whether the DOL will continue to pursue the appeal or even defend the rule in the remainder of the trial court proceedings.

The FLSA establishes a national minimum wage and requires employers to pay nonexempt workers overtime pay at a rate of one-and-a-half times their regular rate of pay. Certain employees are exempt from the FLSA’s overtime provisions, including workers in executive, administrative, and professional positions. The DOL refers to these as EAP exemptions or white-collar exemptions. See 29 U.S.C. § 213(a)(1), 29 C.F.R. Part 541. The exemptions apply to employees who work in these fields and earn income above a certain threshold.

The new rule would raise the threshold from the current $455 per week for a full-time employee to $913 per week, or from $23,660 to $47,476 per year. 81 Fed. Reg. 32391, 32393 (May 23, 2016). The DOL estimated that this would affect about 4.2 million people nationwide. The rule was scheduled to take effect on December 1, 2016, but a lawsuit and an injunction changed that.

The plaintiffs established standing to sue by pleading that they each employed workers in a “bona fide EAP capacity” and paid those workers less than $913 per week. The defendants include the DOL, the DOL’s Wage and Hour Division (WHD), and several officials within the WHD. The plaintiffs allege that the FLSA did not apply to state and local governments, as employers, when it was originally enacted in 1938. They claim that the DOL overstepped its authority by expanding the FLSA’s reach, and more specifically by creating the new overtime rule.

The lawsuit seeks declaratory judgments finding, in part, that the new rule violates the Tenth Amendment, that it exceeds the powers granted by Congress in the FLSA, and that the DOL imposed the rule without following the procedures established by the APA. On November 22, 2016, eight days before the rule was to take effect, a judge granted the plaintiffs’ request for a preliminary injunction blocking its implementation.

The DOL and the other defendants filed an appeal in the Fifth Circuit on December 1, and they also moved in the trial court for a stay of the injunction. The judge denied that motion on January 3. As of late January, the appeal is still pending, but a new Secretary of Labor is also awaiting confirmation by the Senate. We must wait to see how the DOL, under new leadership, will handle the lawsuit and the appeal.

If you need to speak with an overtime attorney about a matter in New Jersey or New York, contact the Resnick Law Group today online, at 973-781-1204, or at 646-867-7997.

More Blog Posts:

New Laws, Regulations Regarding Employee Sick Leave Set to Take Effect in New Jersey, The New Jersey Employment Law Firm Blog, November 11, 2016

New Jersey Federal Court Certifies FLSA Overtime Lawsuit as Collective Action, The New Jersey Employment Law Firm Blog, November 4, 2016

More than 10,000 Workers Around the Country Join FLSA Collective Action Against Restaurant Chain, The New Jersey Employment Law Firm Blog, October 28, 2016

Photo credit: jarmoluk [Public domain], via Pixabay.

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