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IMA Human Resources Blog

Court Stops Implementation of DOL’s New Federal Overtime Rule

Waltz ,Palmer & Dawson, LLC is an IMA B2B Partner

In 2016 a new overtime ruling was scheduled to go into place that would have raised the salary threshold from $23,660 to $47,476. The rule also provided for triennial adjustments based on the 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census region.

Many people know this ruling was stopped, but was it? And do you know the crazy twists and turns this case has taken?


In November, 2016, the U.S. District Court in the Eastern District of Texas granted a nationwide preliminary injunction, saying the Department of Labor’s rule exceeds the authority the agency was delegated by Congress.

In its ruling, the court explained, “The plain meanings of the terms in Section 213(a)(1), as well as Supreme Court precedent, affirms the . . . conclusion that Congress intended the [white-collar] exemption[s] to depend on an employee’s duties rather than an employee’s salary.” The court recognized that the delegation of rulemaking authority allowed the DOL to update the duties tests. However, the court stated that “nothing in the [white-collar] exemption[s] indicates that Congress intended the [DOL] to define and delimit with respect to a minimum salary level.”

The court then determined that the new rule increasing the minimum salary under the salary level test was “directly in conflict with Congress’s intent.” Accordingly, the court ruled that the updated salary level test was unlawful. It reasoned: “With the Final Rule, the [DOL] exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test. . . . If Congress intended the salary requirement to supplant the duties test, then Congress, and not the [DOL], should make that change.” Interestingly, the court was careful to state (almost inconsistently with its opinion) that it was “not making a general statement on the lawfulness of the salary-level test” for the white-collar exemptions.


In December, 2016, the date the new rule was to take effect, the DOL filed a notice of appeal. The appeal will be heard by the U.S. 5th Circuit Court of Appeals.


July 26, 2017, the Department of Labor published a Request for Information (RFI) regarding the Overtime Final Rule, which was published on May 23, 2016, asking for public input on what changes the Department should propose. That comment period has ended and the Department is reviewing those submissions.

August 31, 2017, U.S. District Court Judge Amos Mazzant granted summary judgment against the Department of Labor in consolidated cases challenging the Overtime Final Rule. The court held that the Final Rule’s salary level exceeded the Department’s authority, and concluded that the Final Rule is invalid.

September 5, 2017, the Justice Department asks a federal appeals court to dismiss the DOJ’s appeal in the ongoing battle over a stalled Obama overtime rule that was expected to make some 4 million workers newly eligible for time-and-a-half pay.

October 30, 2017, the Department of Justice, on behalf of the Department of Labor, appeals the district court’s decision to the U.S. Court of Appeals for the Fifth Circuit.

November 6, 2017, the Fifth Circuit granted the government’s motion to hold the appeal in abeyance while the Department of Labor undertakes further rulemaking to determine what the salary level should be.


Chipotle workers sue over company’s interpretation of FLSA overtime ruling

On June 7, 2017, a class action lawsuit was filed by thousands of New Jersey Chipotle workers alleges that the fast casual chain illegally deprived them of overtime pay.

The lead plaintiff on the case is Fairfield resident Carmen Alvarez, a 55-year-old mother and grandmother, who has worked as a manager-in-training at multiple Chipotle restaurants since 2013, often in excess of 40 hours per week. Last November, the suit alleges, she and other apprentices were converted from salary to wage workers and began making overtime—apparently in response to new federal guidelines. But when the Texas ruling came down, the suit alleges, Alvarez and her coworkers lost their overtime.

Attorneys for the plaintiffs argue that last year’s injunction did not actually state the date of the overtime rule’s implementation (Dec. 1), nor did the ruling prevent the rule from actually going into effect. A Chipotle spokesperson told Gothamist that the company is “compliant” with current law.

Where is this case now?

In April, 2018 the case was stayed. The New Jersey federal court has agreed to pause the dispute with Chipotle Mexican Grill Inc. pending Chipolte’s interlocutory appeal over a contempt order levied against the attorneys.  (An interlocutory appeal is essentially an appeal that happens before a case has gone to trial – in this case whether the plaintiff’s attorneys engaged in contempt).

What does this mean for your business? The new rule did not go into effect on December 1 as initially planned. Until there is a further ruling by the Court, employers may continue to rely on the current $455 per week salary threshold for exempt status. But if you had already made changes to your pay schedule in anticipation of the ruling, be careful if you remove an employee’s right to overtime pay.


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