Future of the DOL’s Overtime Rule Uncertain

February 13, 2017

In May 2016, the U.S. Department of Labor (DOL) issued its long-awaited and controversial rule increasing the salary thresholds that exempt workers from federal overtime requirements under the Fair Labor Standards Act (FLSA). Originally, the final overtime rule was slated to go into effect on December 1, 2016. However, just before Thanksgiving, a federal judge in Texas issued an injunction preventing the rule from taking effect. Following that ruling, the DOL appealed and pushed the U.S. 5th Circuit Court of Appeals for a quick decision on the overtime rule’s legality. The 5th Circuit has agreed to hear the appeal on an expedited timeline. On January 25, 2017, the federal government sought a 30-day extension to file its final brief in the appeal in order to “allow incoming leadership personnel adequate time to consider the issues,” suggesting that the new administration may revisit whether to seek appellate review of the current nationwide injunction. The court of appeals, on January 26, granted the government’s motion and extended the time for it to file its final brief until March 2.

President Donald Trump cannot simply rescind the rule; any rule change would need to follow the same long and involved process that originally created the overtime rule. Alternatively, the GOP-controlled Congress could pass legislation repealing or altering the rule directly. Employers should continue to follow developments with the overtime rule and be ready to respond if the courts or the administration takes action.

Overtime Rule Court Battle Accelerated 

On November 22, 2016, Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction on the overtime rule. Because of that injunction, the new overtime rule, which would have raised the salary threshold for exempt employees, didn’t take effect on December 1 as anticipated.

The DOL filed an appeal in the matter and sought expedited briefing and oral argument before the 5th Circuit. The 5th Circuit set an accelerated briefing schedule on the overtime rule. Under the accelerated schedule, briefing was to be completed in January, and oral argument was to be set for the first available opportunity in February. However, the government has now requested an extension of time to file its final brief in the appeal. The Trump administration desires to have additional time to adequately consider the issues involved in the appeal. It would not be surprising if the U.S. government notifies the court of appeals of a change in position regarding the appeal. We will keep you up to date on this court battle as it unfolds in early 2017.

Trump Administration Could Scrap, or Merely Alter, Overtime Rule 

Because of the new administration’s cabinet picks and business-friendly positions in general, employers may feel that the new DOL overtime rule will not take effect even if the court challenges against it ultimately fail. However, you should be prepared for some change in the overtime salary threshold even if the current overtime rule never takes effect.

Importantly, the Trump administration wasn’t able to simply rescind the DOL’s overtime rule with an executive action on day one. Unlike an Executive Order, the overtime rule went through the administrative rulemaking process. To change the rule, the administration would need to submit a new rule and shepherd it through the same administrative process, which can take a significant amount of time. Congress can also change or rescind administrative rules, and the GOP-controlled Congress may take up the issue of overtime early in the next session.

Even if the DOL’s overtime rule doesn’t take effect in its current form, it’s possible that the new administration will still endorse or propose an overtime rule, albeit with a less dramatic increase in the salary threshold. While the Trump administration has expressed its dissatisfaction with the final rule as it was issued, much of that concern, shared by the business community, comes from the size of the salary increases tied to the overtime exemption, not whether the threshold should increase in general. Therefore, employers should still be prepared for possible changes to the overtime exemption rules, even under a Trump presidency.

Bottom Line 

As of now, the new DOL overtime rules are not in effect. Employers should continue to seek legal advice on how to prepare for possible changes to the overtime exemption. For most employers, it will make sense to continue to wait until the legal battles in the courts conclude and there’s a clear directive from the new administration on the rule. Although it may appear that the new administration is hostile to the overtime rule, employers must still be prepared for either the current rule or a new rule to take effect sometime in 2017.

This article, slightly modified to note recent updates, was featured in the February 2017 issue of the Wisconsin Employment Law Letter, which is co-edited by Axley Brynelson Attorneys Saul Glazer and Michael Modl and published by BLR®—Business & Legal Resources. Reproduced here with the permission of BLR®—Business & Legal Resources.

For more information about "Future of the DOL’s Overtime Rule Uncertain", contact Eric R. Hunt at ehunt@axley.com or 608.260.2489.