Overtime Final Rule Blocked; Next Steps Unclear

National Council of Nonprofits

OvertimeOn the Tuesday before Thanksgiving, a federal district judge in Texas issued a nationwide preliminary injunction blocking – at least temporarily – the implementation and enforcement of the Overtime Final Rule that was slated to take effect December 1, 2016. The judge ruled that the U.S. Department of Labor exceeded its authority when it issued regulations in May (the “Overtime Final Rule”) that changed the criteria for determining which employees are bona fide executives, administrative personnel, or professionals “exempt” from being paid overtime (commonly called the “white collar exemption”) by revising the salary threshold that triggers the exemption. The injunction only halts the new rule from becoming law; it does not change current rights and obligations under the underlying federal wage and hour laws. Nonprofit and other employers still must comply with existing federal and state laws regarding fair labor standards, including properly classifying employees as being exempt from or entitled to being paid overtime. For more information on the overtime rule and the lawsuit, read the Special Edition of Nonprofit Knowledge Matters, published on November 23.


The court ruling creates doubts for employers and employees as to what comes next regarding the Overtime Final Rule. The likely next steps in the litigation are for the district court to issue a permanent injunction, the federal government appeals that decision to the Fifth Circuit Court of Appeals, and possibly the U.S. Supreme Court. This process could be expedited so the matter is decided on the merits or allowed to drag out until after President-Elect Trump is inaugurated, at which time he could instruct government lawyers to change their position in the lawsuit. If the courts allow the Overtime Final Rule to take effect by mid-January, the usual procedures for repealing existing regulations – passing legislation or rewriting the regulation pursuant to the time-consuming Administrative Procedures Act – would have to be followed by Congress and the new Administration. And, regardless of the timing in the litigation, if the current Congress adjourns sine die early enough in December, the new Congress that convenes on January 3 could invoke the 1996 Congressional Review Act to block the regulation from ever taking effect. This is because there would have been less than 60 legislative days between the publication of the final rule and the adjournment of Congress.

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