Texas Judge Blocks Overtime Rule

On November 22, 2016, just days prior to President Obama’s initiative seeking to expand overtime wage protections to 4.2 million workers was set to take effect, Texas District Judge Amos L. Mazzant III issued a nationwide injunction blocking the overtime rule from going forward. The injunction means that, at least temporarily, the Department of Labor is halted from its bid to double the salary level at which otherwise exempt workers are required to receive overtime, from $23,660 to $47,476.

The key statement from Judge Mazzant’s 20-page ruling is the following:

To be exempt from overtime, the regulations require an employee to (1) have [executive, administrative or professional] duties; (2) be paid on a salary basis; and (3) meet a minimum salary level. . . . The salary level was purposefully set low to “screen[] out the obviously nonexempt employees making an analysis of duties in such cases unnecessary.” . . . But this significant increase to the salary level creates essentially a de facto salary-only test.

While Maryland employers should view this unexpected ruling as a victory, it also has the potential to create new complications for employers who took action in anticipation of the new law taking effect on December 1, 2016. For example, if an employer already notified employees of salary raises or of being changed to non-exempt status, employers must now be cognizant of both morale implications and potential breach of contract claims prior to reversing those decisions. These matters must be carefully assessed and employers should obtain legal guidance prior to making any further changes.

Ultimately, the takeaway from this latest FLSA development is that employers must continue to remain vigilant with regard to all wage and hour issues. While, for the moment, employers no longer need to reassess FLSA classifications based strictly upon salary, it still remains an excellent opportunity to perform further classification analysis with regard to employee job duties and other FLSA issues. Routine audits of employee classifications are the only effective way employers can remain FLSA compliant and minimize their exposure to costly litigation.

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