On August 31, 2017, a U.S. District Judge in the Eastern District of Texas ruled that the Department of Labor’s (DOL) final overtime rule, which would have expanded overtime protections for millions of white-collar workers, is invalid. In light of the decision, the DOL recently informed the Fifth Circuit that it is dropping its appeal of the District Court’s preliminary injunction, which halted the rule just days before it was scheduled to go into effect on December 1, 2016.

The DOL’s new rule would have required employers to pay time and a half to employees who earned less than $47,476 (raised from $23,660) and worked more than 40 hours a week, and also would have increased the overtime eligibility threshold for highly compensated workers from $100,000 to approximately $134,000.

In his decision, Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas ruled that the increase in the minimum salary threshold would render meaningless the other part of exemption criteria, the “duties test,” which looks at the functions and tasks that an employee performs. Ultimately he determined the rule exceeded the DOL’s authority. Since the release of the decision, the DOL has informed the Fifth Circuit that it wants to drop its appeal of the preliminary injunction blocking the rule’s implementation given that the same Texas court has now permanently struck down the rule.

Judge Mazzant’s decision is unsurprising given that the legal brief submitted by the Trump administration earlier this summer announced its intention to stop legally defending the DOL’s regulation. Additionally, the DOL on June 27, 2017 sent a request for information on the 2016 overtime rule to the Office of Information and Regulatory Affairs. Generally speaking, such a request is a signal that the government agency is looking for information to determine whether there is a need for new rulemaking.

In anticipation of the DOL’s rule becoming effective, and the uncertainty that has followed, many employers have already made changes consistent with the rule. Depending on the types of changes made, most employers are well advised to maintain the changes for the sake of avoiding possible employee relations issues, rather than reverting back to the pre-rule compensation methods.

State laws are often more stringent than the federal law. In light of the DOL’s rule invalidation, states are likely to respond with their own legislatures raising the salary threshold. In fact, in December 2016 New York raised the exemption levels for the state on a tiered basis according to geographic location, to be phased in through December 31, 2021.

Wage and hour law is one of the more complicated and confusing areas in the employment law landscape. Seeking advice on wage and hour law issues is always advisable as penalties for violations can be extremely costly.

For more information on the impact of this new law, please contact:

• Christopher P. Maugans 
• Caroline J. Berdzik
• Or another member of Goldberg Segalla’s Employment and Labor Practice Group