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LITIGATION AND THE COURT’S RULING Aſter the DOL announced its final
rule, twenty-one states joined by business associations and chambers of commerce from around the country, brought suits in a Texas federal district court to halt its enforcement. Tey argued, among other things, that the rule went beyond the scope of the DOL’s authority because it essentially replaced the primary duties test with a de facto salary test when it dramatically raised the salary threshold. Tey also challenged the authority of the DOL to automatically update the threshold every three years. On Nov. 22, 2016, the court issued a preliminary injunction that blocked the rule from going into effect. Te court held the
plaintiffs were likely to succeed on their
argument that the DOL had overstepped its authority by so drastically raising the salary threshold for exemptions. Aſter analyzing the FLSA, the court concluded that Congress intended the EAP exemptions to be primarily based upon an examination of an employee’s duties. In contrast, the DOL’s new overtime rule functionally replaced any consideration of duties with a salary test, where an employee who was previously exempt from the FLSA’s overtime provisions would now be classified as non-exempt solely because the employee made less than $47,476 annually. According to the court, while the DOL
has broad authority to define what duties qualify an employee for the EAP exemptions, it does not have the authority to categorize an employee as non-exempt wholly without regard to that employee’s duties. Tus, the court found that the plaintiffs were likely to succeed on the merits of their argument, an essential factor in favor of granting a preliminary injunction. Te court also found that the states would suffer irreparable harm if forced to comply with the rule. Terefore, the court granted the motion for an injunction. Te injunction applies to all employers nationwide.
If you have not conducted an audit of your employees’ actual job duties, and corresponding job descriptions, to make sure they are properly classified, you may be exposing your company to significant potential liability.
WHAT DOES THE FUTURE HAVE IN STORE FOR THE NEW RULE
Te court’s ruling has thrown the future of
the DOL’s new rule into doubt. First, while the injunction is only preliminary, courts do not oſten grant preliminary injunctions against the implementation of a new federal rule. When a court does so, it is generally a good indication that it probably will not uphold the regulation. Given that the court thinks that the new overtime rule likely violates the plain text of the FLSA, it is probably unlikely to change its mind later. Additionally, while the DOL is appealing the ruling, the appeal will not even be fully briefed until February, 2017, aſter the new administration takes over. Also, the United States Court of Appeals for the Fiſth Circuit, which will consider the appeal, is generally a more conservative- leaning court that has previously upheld preliminary injunctions blocking other Obama administration actions. Te results of November’s election
also further cloud the new rule’s future. Donald Trump becomes President on January 20, 2017. It is likely the new Trump administration will drop the appeal or stop defending the rule altogether. Republicans, who have expressed their disapproval of the new rule, will control both houses of Congress, and legislation to amend, delay, or repeal the rule, and/or to clarify the applicable FLSA provisions, is also likely.
WHAT NOW FOR EMPLOYERS With the implementation of the new
overtime rule blocked, the question now is: what should an employer do? Te answer to this question will be different for each company. If you have already given salary increases to exempt employees to comply with the now-enjoined rule, you may want to consider the implications if you attempt rescind those salary increases. If you have not implemented changes to comply with the
24 • TENNESSEE TRUCKING NEWS Q4 WINTER 2017
new rule, you may want to consider holding off on any plans to do so, even if you have already announced plans to raise salaries. If the court reverses its own injunction, or if the injunction is overturned on appeal, it is unlikely that employers would face retroactive liability for noncompliance with the rule. Tus, there is no compelling reason to implement compensation changes at this time because of the pending rule. Significantly, however, if companies have
not already done so in conjunction with preparation for the proposed new rule, employers should affirmatively consider conducting wage hour audits of their salaried, exempt employees. Such audits should clarify and confirm whether employees qualify for the EAP exemptions or other applicable exemptions. Te primary duties test remains as significant as ever. If you have not conducted an audit of your employees’ actual job duties, and corresponding job descriptions, to make sure they are properly classified, you may be exposing your company to significant potential liability. Being proactive and conducting such
a wage hour audit and updating job descriptions as necessary, are prudent steps in protecting your business interests. A company whose employees are properly classified, based on their respective job duties, with clear job descriptions, will not only better insulate itself against potential liability in a misclassification lawsuit, but will also be in the best position to deal with future changes in the FLSA regulatory landscape. TTN
R. Eddie Wayland is a partner
with the law firm of King & Ballow. He has represented trucking industry employers for years and serves as General Counsel for the Truckload Carriers Association. You may reach Mr. Wayland at (615) 726-5430 or at
REW@Kingballow.com. Te author would also like to acknowledge and thank his associate, David Goldman, for his contribution in
the preparation of this article.
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