On November 22, 2016, the United States District
Court for the Eastern District of Texas entered an order granting a preliminary
injunction and halting implementation of the new overtime rule previously
scheduled to take effect on December 1, 2016. The order came in a lawsuit brought by 21 states challenging the new
The Plaintiff States allege that the new rule
promulgated by the U.S. Department of Labor (USDOL) exceeds the authority
provided by the Fair Labor Standards Act (FLSA). In its decision to grant
a preliminary injunction, the court held that (1) the Plaintiff States are
likely to prevail on the merits in their lawsuit; (2) the Plaintiff States have
demonstrated a high likelihood of irreparable harm if the rule is implemented;
(3) a balancing of hardships weighs in favor of an injunction; and (4) the
public interest is best served by an injunction. The court described the
public interest as follows:
The Court finds the public
interest is best served by an injunction. If the Department lacks the authority
to promulgate the Final Rule, then the Final Rule will be rendered invalid and
the public will not be harmed by its enforcement. However, if the Final Rule is
valid, then an injunction will only delay the regulation’s implementation. Due
to the approaching effective date of the Final Rule, the Court’s ability to
render a meaningful decision on the merits is in jeopardy. A preliminary
injunction preserves the status quo while the Court determines the Department’s
authority to make the Final Rule as well as the Final Rule’s validity.
The injunction applies nationwide:
A nationwide injunction is
proper in this case. The Final Rule is applicable to all states. Consequently,
the scope of the alleged irreparable injury extends nationwide. A nationwide
injunction protects both employees and employers from being subject to
different EAP exemptions based on location.
A copy of the order is available here.
What does it mean for employers? This order is not a
final determination on the merits. For
now, the new overtime rule is on hold, pending further action by the
courts. This means it is uncertain whether the rule will ever be implemented,
whether on December 1 or at some later date. Given the anticipated shift in philosophy of
the new Trump administration and
Congress’s disposition to agree on this issue, it is possible that there
will be significant changes to the rule via new rulemaking or legislative
action prior to a final determination in this lawsuit. For now, the status of
the new overtime rule is “on hold.” Because
there is a possibility that the rule will still take effect at some point,
employers should remain vigilant on the
status of affected employees and
remain ready to implement the new overtime changes, as well as develop an
effective communication plan to update affected employees.
Plews Shadley Racher & Braun LLP is available
to assist employers in navigating this new development. Additional information about Plews Shadley
Racher & Braun LLP and its business services is available at www.psrb.com.
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©2000-2014 Plews Shadley Racher & Braun LLP. All rights reserved. This web site is published as a service to our clients, colleagues and others for informational purposes only. These materials should not be considered as, or a substitute for, legal advice and they are not intended to be, nor do they create, an attorney-client relationship.