The Department of Labor’s Overtime Rule

{3:06 minutes to read} In my November article, Update on Overtime Rules, I had mentioned that a federal court judge in Texas had issued a nationwide injunction blocking the Department of Labor’s rule requiring overtime pay for more than 4 million new workers, which was to have taken effect on December 1, 2016. This ruling arose out of a lawsuit filed in the U.S. District Court, Eastern District of Texas challenging the overtime rule, arguing that the Department of Labor exceeded its statutory authority in issuing the regulation.

On December 15, 2016, the Department of Labor (DOL) filed an appeal from the above order in the U.S. Court of Appeals for the Fifth Circuit. The basis for the appeal was that the updated salary baseline stated in the new rule is commensurate with previous ones set in the past 75 years, and that the harm caused to employees by the preliminary injunction “strongly outweighs” the costs that the plaintiffs who had sought the order would incur if the new overtime rule went into effect. In addition, 26 members of Congress have filed an amicus brief in the Fifth Circuit Court of Appeals urging the Court to reverse the injunction.

The DOL also filed a motion in U.S. District Court, Eastern District of Texas to stay the lawsuit until a ruling was issued on its injunction appeal. On January 3, 2017, the Court denied the motion.

Although the appellate court granted the DOL’s request for an expedited hearing of its appeal, the inauguration of a new President may change the landscape. Andrew Puzder has been designated as new Secretary of Labor but has not been confirmed as of this writing. Mr. Puzder was CEO of CKE Restaurants (which operates the Hardee’s and Carl’s Jr. fast food chains) and has been critical of the new overtime rules, leading to speculation that appeal and defense of the lawsuit would be withdrawn if he were to be confirmed. Therefore, the Texas AFL-CIO has moved to join a lawsuit challenging the overtime rules which, if granted, would allow the defense of the lawsuit to proceed if the Trump administration withdraws the DOL’s defense.

Despite the injunction, many workers have already derived the benefit of the new rules as some companies had already committed to reclassify workers or increase their salaries at the time the injunction was issued. The status of millions of other employees remains in limbo pending the outcome of the above legal and political machinations.