On November 22, a federal district court in Texas enjoined nationwide implementation of the Labor Department’s final overtime rule. Judge Amos Mazzant, ruling on a lawsuit brought by 21 states and a business coalition, concluded that the executive, administrative, or professional employee exemptions do not grant the Department the authority to use a salary-level test or an automatic salary updating mechanism under the rule.
The injunction may leave school districts in a state of limbo for weeks, months and perhaps longer as injunctions often do not resolve cases and may lead to lengthy appeals. However, in this case, the injunction could lead to the Final Rule's quick demise if the Department decides not to appeal the decision.
To the extent that school districts have not already increased exempt employees’ salaries or converted them to non-exempt positions, the injunction will allow school districts to postpone those changes. Also, depending on the final resolution of this issue, it is possible they may never need to implement them.
While the Final Rule is now enjoined, school districts must be mindful not only of morale issues that might result from not providing employees with raises that were implemented or announced, but also of potential breach of contract claims.
Here are a few tips for school districts to consider during this "limbo" stage:
First, understand the court's ruling is temporary. It may be reversed or appealed in the immediate future. Also, it is possible (although unlikely) that a reversal could be deemed retroactive to December 1. Employers must be sure to understand that even maintaining the status quo is not absent all risk.
Second, some school districts saw this change as an opportunity to move salaried employees who were probably misclassified (due to not meeting the duties tests) to their proper place as non-exempt employees. If your school district falls into that category, you should still move ahead with the changes. However, if your employee was misclassified due to the duties test (in other words you have them classified exempt but they probably do not meet the duties test and should be non-exempt), the injunction does not alter this fact. The person is still misclassified. You need to fix it.
Third, consider your options carefully. There is no “one size fits all” solution to an employment issue - and certainly not to this one. Many school districts have spent a great deal of time making payroll modifications and communicating with employees about the changes. While school districts are free to not implement the changes, many may decide that moving forward is less risky. For example, many employers have decided to increase the salaries of certain employees to bring them over the new threshold and retain their exempt status. Employers should think long and hard before telling the employee promised a raise on December 1 “never mind.”
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