New Overtime Compensation Rule in Flux

By Melanie C. Hagan posted 01-09-2017 08:55


Last May, the Department of Labor issued a rule, scheduled to go into effect December 1, extending Fair Labor Standards Act (FLSA) overtime protections to workers who do not earn at least $47,476 a year ($913 a week). In other words, the salary threshold for being exempt from overtime pay was slated to increase from $23,660 to $47,476—a change that would have affected approximately 4.2 million workers across the country (and approximately 101,000 Michigan workers). In addition, the rule provided for automatic adjustments to the threshold every three years.

Just 10 days before the rule’s effective date, a federal judge issued a preliminary injunction preventing the rule from taking effect. Twenty-one states (Michigan among them) had brought an action in federal court in Sherman, Texas, in September to block the rule. Among other claims, these states allege that the rule violates the Tenth Amendment by dictating how much the states are required to pay state employees. They also allege that states “will be forced to eliminate or alter employment relationships and cut or reduce services and programs.” The states also argue that the rule exceeds the authority delegated to the Department in the FLSA.

In granting the states’ emergency motion for preliminary judgment, the district court concluded that

  • the states had demonstrated a likelihood of success on the merits in their claim that the rule exceeds the Department’s delegated authority;
  • the states would suffer irreparable harm, not only from the costs of implementing the rule itself, but also from the impact that compliance will have on governmental programs and services;
  • the balance of hardships weighed in favor of injunctive relief because the Department failed to articulate any harm it would suffer in delaying implementation of the rule; and
  • the public interest is best served by an injunction because it preserves the status quo while the court determines the validity of the final rule.

The court then issued a nationwide injunction to “protect[] both employees and employers from being subject to different” exemptions based on location.

Assuming that the court telegraphed its future opinion on the merits, this case may have a future in the appellate courts if the Department continues to defend the rule. However, given the administration change in January, the likelihood of that may be pretty small. This rule may just be dead in the water.

For more on the Fair Labor Standards Act and related regulations, see chapter 3 of Employment Law in Michigan.