Federal Judge Blocks the Department of Labor’s New Overtime Rules, Blocks Changes to the “White Collar” Exception

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Jason B. Freeman

Jason B. Freeman

Managing Member

214.984.3410
jason@freemanlaw.com

Mr. Freeman is the founding member of Freeman Law, PLLC. He is a dual-credentialed attorney-CPA, author, law professor, and trial attorney.

Mr. Freeman has been named by Chambers & Partners as among the leading tax and litigation attorneys in the United States and to U.S. News and World Report’s Best Lawyers in America list. He is a former recipient of the American Bar Association’s “On the Rise – Top 40 Young Lawyers” in America award. Mr. Freeman was named the “Leading Tax Controversy Litigation Attorney of the Year” for the State of Texas for 2019 and 2020 by AI.

Mr. Freeman has been recognized multiple times by D Magazine , a D Magazine Partner service, as one of the Best Lawyers in Dallas, and as a Super Lawyer by Super Lawyers, a Thomson Reuters service. He has previously been recognized by Super Lawyers as a Top 100 Up-And-Coming Attorney in Texas.

Mr. Freeman currently serves as the chairman of the Texas Society of CPAs (TXCPA). He is a former chairman of the Dallas Society of CPAs (TXCPA-Dallas). Mr. Freeman also served multiple terms as the President of the North Texas chapter of the American Academy of Attorney-CPAs. He has been previously recognized as the Young CPA of the Year in the State of Texas (an award given to only one CPA in the state of Texas under 40).

Federal Judge Blocks the Department of Labor’s New Overtime Rules, Blocks Changes to the “White Collar” Exception

A Texas judge temporarily blocked the Department of Labor’s proposed overtime rules in a recently-issued order.  The order, issued out of the Federal District Court for the Eastern District of Texas (my backyard), granted an emergency request for a nationwide preliminary injunction against the enforcement of the new rules.  The plaintiffs challenging the legality of the rules—a group of 21 states led by Texas and Nevada and more than 50 Texas business organizations headed up by the Plano Chamber of Commerce—demonstrated “a substantial likelihood of success,” the standard necessary for the court to grant the injunctive relief requested under Federal Rule of Civil Procedure 65(d).

Under the Fair Labor Standards Act (“FLSA), employees engaged in commerce must receive at least the federal minimum wage (currently, $7.25 per hour) for the hours that they work. Employees are also entitled to receive overtime pay at one and one-half times their regular rate of pay for each hour that they work above forty in a week. The FLSA, however, contains a number of exemptions from the overtime rule.  For instance, under what is commonly referred to as the “white collar” exemption, “any employee employed in a bona fide executive, administrative, or professional capacity” may be exempted from the FLSA’s minimum wage and overtime requirements.

To meet the white-collar exemption, an employee must satisfy three criteria:

The new DOL rules, which would have been effective December 1, 2016, would increase the minimum salary level for exempt employees from $455 per week ($23,660 annually) to $921 per week ($47,892 annually), substantially increasing the number of employees entitled to time-and-a-half overtime payments and significantly raising costs for employers—estimates showed that nearly half of small businesses would be affected.

The court’s ruling is a temporary measure; litigation will continue until a final ruling is issued.  Of course, absent some expedited measures, there is not likely to be a final ruling prior to president-elect Trump taking office.  It seems quite possible that a Trump-led administration may simply drop the litigation, leaving the new rules to die on the vine.