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By of Jenkins Fenstermaker, PLLC on 11/23/2016

The New Overtime Rule? Never Mind

Do you remember Gilda Radner's portrayal of the Emily Litella character on Saturday Night Live? While in the midst of delivering an impassioned editorial, Emily would be informed that she had made a fundamental factual error. She would then end her tirade with a meek, "Never mind."

Those words seem appropriate this morning, in light of news from a federal district court in Texas. Late yesterday, the court issued a nationwide preliminary injunction against the U.S. Department of Labor ("DOL"). This injunction forbids the DOL from implementing its new overtime rule.

Image of a judge's gavel representing how the new overtime rule died after a federal court in Texas issued a preliminary injunction.

The new overtime rule was set to go into effect on December 1st. It would have presented employers with this stark choice: Raise the salaries of your exempt (salaried) workers to at least $47,476 or convert them to non-exempt (hourly) employees who would be eligible for overtime. For many small business and non-profits, it would have been very hard to find the cash to increase the salaries of exempt employees or to pay overtime to the newly non-exempt employees.

The court held that the DOL had exceeded its authority when it promulgated the new overtime rule. While the DOL has limited authority to define the types of job duties that make an employee exempt from overtime, the court held that the DOL does not have the authority to set a minimum salary requirement that is so high that an employee's job duties basically become irrelevant: "With the Final Rule, the Department exceeds its delegated authority and ignores Congress's intent by raising the minimum salary level such that it supplants the duties test."

Before issuing the nationwide preliminary injunction, the district court examined a variety of factors, including whether the plaintiffs were likely to win at trial, whether the plaintiffs would suffer irreparable harm without an injunction, whether the balance of hardships favored the injunction, and whether the public interest was best served by the issuance of the injunction. The court found that each factor favored the preliminary injunction.

A preliminary injunction is only the first step in this legal battle. Next up may well be a hearing on a permanent injunction. Given the fact that this case is basically about the law, rather than disputed facts, it would be surprising if the court issued a different ruling after a hearing on a permanent injunction.

It would also be surprising if the DOL's new overtime rule ever goes into effect, given that President Obama's tenure is almost over and the DOL will soon be under the supervision of a Republican president. Even if incoming President Trump has more pressing matters to which to attend, it is likely that his Republican colleagues in Congress will take steps to undo the new overtime rule.

This does not mean that the minimum salaries of exempt employees is going to stay the same: Even business organizations agree that it has been too long since the minimum salary was last raised. But it is very unlikely the minimum salary will be set at $47,476 -- which is double the current minimum salary.

In the meantime, when you are asked about the new overtime rule, you can simply say, "Never mind."