The Fate Of The New Overtime Regulations Remains Uncertain

The legal battle over the new overtime regulations under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201, et seq. ("Final Rule"), continues. In the remaining weeks before President-elect Trump's January 20, 2017, inauguration, the U.S. Department of Labor ("DOL")1 asked the Fifth Circuit Court of Appeals to salvage its Final Rule. Meanwhile, President-elect Trump's choice for labor secretary—Andrew Puzder, the chief executive of the company that operates fast food companies Carl's Jr. and Hardee's—has been an outspoken critic of the rule, suggesting its eventual demise.

On December 1, 2016, the DOL filed a notice of appeal to overturn the nationwide preliminary injunction blocking implementation and enforcement of certain provisions of the Final Rule. The next day, the DOL asked the Fifth Circuit to expedite the proceedings. On December 8, 2016, the Fifth Circuit granted the DOL's request and issued an expedited briefing schedule, pursuant to which oral argument will be scheduled for the first available sitting after briefing is completed on January 31, 2017. The DOL, represented by counsel from the DOL and the Department of Justice ("DOJ"), filed its opening brief on December 15, 2016.

On the same day the Fifth Circuit ordered expedited review, President-elect Trump officially announced Mr. Puzder as his choice to run the DOL. In May 2016, Mr. Puzder wrote an op-ed in Forbes saying the Final Rule "will not deliver as promised" and "will be another barrier to the middle class rather than a springboard." Mr. Puzder further wrote, "This new rule will simply add to the extensive regulatory maze the Obama Administration has imposed on employers, forcing many to offset increased labor expense by cutting costs elsewhere. In practice, this means reduced opportunities, bonuses, benefits, perks and promotions."

In sum, the timing of the incoming Administration and the DOL's appeal to the Fifth Circuit creates a number of possible scenarios and outcomes and, ultimately, uncertainty with respect to the fate of the Final Rule.

Overview of the Final Rule

On March 23, 2014, President Obama issued a memorandum directing the Secretary of Labor to "modernize and streamline the existing overtime regulations for executive, administrative, and professional employees." In response to the President's memorandum, the DOL published a Notice of Proposed Rulemaking to revise 29 C.F.R. § 541, et seq. After receiving nearly 300,000 comments regarding the proposed rule, the DOL published the Final Rule. The Final Rule mandated an increase in the minimum salary level for executive, administrative, and professional employees classified as exempt from the FLSA's overtime protections (i.e., white collar or "EAP" exemptions) from $455 per week to $913 per week, or from $23,660 to $47,476 per year. The new salary level was based on the 40th percentile of weekly earnings of full-time salaried workers in the lowest wage region of the country, which is currently the South. Additionally, the Final Rule established an automatic updating mechanism that adjusts the minimum salary level every three years. Under the Final Rule, the first automatic increase would occur on January 1, 2020. The Final Rule also increased the salary threshold for the highly compensated employee exemption from $100,000 to $134,000.

Final Rule Preliminarily Enjoined on November 22, 2016

On September 20, 2016, 21 states and more than 50 business groups filed two separate lawsuits in the United...