US Dept of Labor Files Appeal to Vacate Overtime Injunctive Relief…AND Requests Expedited Review of Appeal

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The Department of Labor filed a motion for an expedited briefing of its appeal of a federal judge’s decision to put the brakes on the very flawed overtime Final Rule.  Employers should be very cautious at this point before making any “major” changes such as “reclassifying” otherwise qualified salaried exempt employees…to hourly non-exempt status.  We have seen a multitude of “knee-jerk” reactions to this ill-thought out Final Rule whereby many of our clients have, in fact, reclassified otherwise qualified salaried exempt employees to hourly non-exempt status thus stripping them of any prestige or sense of professional accomplishment and, additionally, penalizing them monetarily for no good business reason other than what’s been mandated in this new Overtime Final Rule.  And, to add insult to injury…those same employees, typically,  will not have an opportunity to work much overtime, if any, under the new law because many employers have further reduced their work hours so they will rarely have an opportunity to work over 40 hours in any given workweek.

The appeal to stay the injunction was brought Dec. 1 by Labor Secretary Thomas Perez, Wage and Hour Administrator David Weil, Assistant Administrator Mary Zeigler and the DOL following the November 22 injunctive relief against the new overtime Final Rule by federal district judge in Texas.  The appellate process can be time-consuming.   The notice of appeal triggers the District Court for the Eastern District of Texas to send a record of the case to the Fifth Circuit Court of Appeals in New Orleans, which could take a couple of weeks. Then there is the timeline for filing briefs, which is at least 30 days.   Without an expedited hearing, the briefs wouldn’t be filed before Inauguration Day on Jan. 20.

Few Employer Objections to Raising Salary Level

A recent survey of our clients indicated that there were few objections  to raising the minimum salary level from its present $23,660 per annum to, ultimately, the $47,476 per annum. However, those same employers also stressed that the increase should be mandated “overnight” on employers.    Emperical evidence of other wage or salary increases by the feds and/or states over the years has always seen a “graduated” increase over several years..until it reaches the statutory required level.  These  “graduated” incremental increases were easier to absorb for employers than what US DOL and President Obama are requiring with this new Final Overtime Rule.

 If the upcoming change of administration is the only reason presented (President-elect Trump has indicated he does not support the entire Final Rule), the judges may not be inclined to speed up the review process.  Again, we advise our client employers to be somewhat cautious about making unnecessary job reclassifications especially if the salaried exempt employees are clearly a bonafide salaried exempt employee at this point in time…even if they’re earning less than the $47,476 per annum minimum criteria  which the new Overtime Final Rule would mandate.  We believe, based on our professional experience with US DOL/WHD, that we will see an increase in the salary level minimum but would be “phased in” over time…rather than implemented “overnight” as this Final Rule attempts to do.

Motion to Stay?

Now employers must anxiously await what the 5th Circuit decides to do.  But I’m inclined, based on my investigative experience with US DOL Wage and Hour Division, to believe that there will ultimately be a salary increase to the current salary level ($23,660 per annum)..but that the increase will be implemented gradually, over several years, just as states’ minimum wage increases have been implemented.

And, bear in mind, that US DOL solicitors are being prodded by Secretary Perez and President Obama (before he leaves office) to “create havoc” by filing a request with the courts to  suspend the injunction during the appeals process.  If that happened, we’d be back to square one and the rule would apply—perhaps only for a limited period of time.

Difficult Legal Road Ahead for DOL

Although DOL has appealed the preliminary injunction, the overtime rule still faces an uphill battle.  A final court decision could take some time and the new administration arriving on Jan. 20 is unlikely to defend the rule in court.  Further, many legal experts we have consulted with feel that this case focuses more on the new Overtime Final Rule violating the federal Administrative Procedures Act more than any other legal argument presented so far.  Either way, an appeals court can take months to rule on a lower court’s decision.   It’s going to be interesting to see how this all plays out…during 2017.  But, again, employers should be very cautious about making any “knee jerk” reactions to this Overtime Final Rule…until the courts have ruled.

And, lastly, the Department of Labor under President-elect Donald Trump may order the withdrawal of DOL’s appeal of a preliminary injunction blocking the federal overtime rule if there hasn’t been a decision on the appeal by Inauguration Day.

Twenty-one States File Legal Challenge to Obama’s New Final Overtime Rule…Finally

I’ve been telling everyone for the past several months that, so far, there hasn’t been any legal challenges to the US Dept of Labor’s new “Final Rule” on overtime which is slated to go into effect at midnight on December 1, 2016.  However, that’s not the case now.

The overtime rules implemented by the Obama administration are scheduled to take effect Dec. 1. The regulation, which was finalized in May, makes anyone earning up to $47,476 a year, or roughly $913 a week, eligible for overtime pay — a dramatic increase over the $23,660 cutoff now.  But the lawsuit argues the rule is unconstitutional because it dictates wages that states must pay employees for government functions, according to the Review-Journal.

It also argues the change would upset the state budgeting process by requiring states to pay overtime to more employees.

“Longstanding federal law requires an overtime exemption for ‘bona fide executive, administrative or professional’ employees,” Nevada Attorney General Adam Laxalt (R) said in statement to the Review-Journal. He went on to say that the federal government “is forcing state, local and private employers to pay overtime to any employee who earns under a certain amount.”

The Department of Labor says the rule will extend overtime to more than 4 million workers in its first year.

“This long-awaited update will result in a meaningful boost to many workers’ wallets, and will go a long way toward realizing President Obama’s commitment to ensuring every worker is compensated fairly for their hard work,” the agency said, according to the Review-Journal.

Other states that joined in the suit are Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, New Mexico, Ohio, Oklahoma, South Carolina, Texas, Utah and Wisconsin.

On the surface of it, the new Final Rule would, in fact, have more employees eligible for overtime compensation.  But what I’ve found over the last several months…dealing directly with clients, law firms, accountancy firms and employers, is that there seems to be a large “negative” effect in the form of “reduced work hours”; reclassification of “salaried exempt”  employees to “non-exempt hourly” regardless of whether or not they were actually and correctly filling the work role of a bonafide “salaried exempt” worker.  And, the most dramatic effect so far has been to simply terminate personnel because employers believe they will not be able to afford paying their lowest “salaried exempt” employee $47,476.00 per year.

Many of us in labor law enforcement, have been perplexed over why US Dept of Labor’s Wage and Hour Division never ever considered “phasing in” this new Final Rule.  Whenever there has been a substantial increase in the minimum wage on a state by state basis, states will typically “phase in” annual increase “incrementally” until the final minimum wage is reached.  So, why US Dept of Labor and Obama administration chose not to do that in this case…is perplexing.

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