A Federal District Court in Texas issued a decision declaring the Department of Labor’s (DOL’s) new overtime rules “invalid” and, therefore, completing what may prove to be the final step in the rule’s slow demise.

 

 

While an appeals court was busy debating the appropriateness of the injunction that initially halted the rule, a lower court judge reviewed the rule on its merits and found that the U.S. DOL did not have the authority to issue a rule that effectively eliminates the Fair Labor Standards Act’s duties tests. He also noted that because the rule itself is unlawful, the automatic updates that it included are unlawful, too. The ruling wasn’t unexpected, but could have implications for DOL’s ability to regulate in the future.

 

 

The Decision:

 

 

The District Court issued its final decision on the merits, granting summary judgment in favor of certain plaintiff business organizations and ruling that the new overtime regulations were invalid.

 

 

In his ruling, Judge Mazzant echoed many of the sentiments he had expressed when enjoining the implementation of the new overtime rules last year. Judge Mazzant held that the DOL’s attempt to double the salary level threshold to determine overtime eligibility status was a “significant increase” that “would essentially make an employee’s duties, functions or tasks irrelevant if the employee’s salary falls below the new minimum salary level.” Judge Mazzant also noted that while the DOL was permitted to establish a salary level to create a “floor” to assist in determining whether an employee qualified as a “bona fide” exempt employee, “the Department does not have the authority to use a salary-level test that will effectively eliminate the duties test.” Consequently, the court ruled the Final Rule to be invalid and permanently enjoined its implementation.

 

 

What Now?

 

 

Although the DOL had appealed the issuance of the preliminary injunction, this new development likely advances the pending appeal and will require President Trump and the DOL to reexamine their options going forward.

 

 

Impact on Employers:

 

 

The immediate impact on employers is that the current regulations with respect to overtime will endure for a while. Employers will want to keep informed as the Department takes further steps, whether it be to pursue an appeal, roll back, or revise the overtime regulations.

 

 

Prior Information: https://www.paylocity.com/2016/05/18/new-overtime-regulations-finalized/ 

 

 

Thank you for choosing Paylocity as your Payroll Tax partner. Should you have any questions please contact your Paylocity Account Manager. 

 

 

This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.