Court Rules Against Labor Department. Is it Déjà Vu All Over Again?


The Nov. 22 ruling by a federal district court to prevent the Labor Department’s overtime rule from taking effect Dec. 1 hews closely to the story line of a 2014 court decision that prevented the department from implementing its home-care rule in 2015. 

The comparison offers employers food for thought about whether they should to stay the course or try to undo the changes that were planned to be in compliance when the overtime rules took effect Dec. 1.

In the case of the home-care rule, which expanded minimum-wage and overtime protections available to certain home-care workers, employers had to wait nearly nine months for the home-care rule to be upheld. 

While the home-care rule was being contested, “some employers, relying on the district court’s injunction, did not pay overtime,” as the home-care final rule would have required had it taken effect Jan. 1, the law firm Jackson Lewis said Nov. 23 in an article on its website. 

“When the D.C. circuit ruled, reversing the district court’s decision, employees sued for overtime for the eight-month period between the district court’s decision and the circuit reversal,” the law firm said.

The courts were divided on the question of whether employers were required to pay overtime to home-care workers starting from when the appeals court issued its final ruling, which took effect Oct. 13, 2015, or from Jan. 1, 2015, the original date for the rule to take effect, the law firm said.

A federal district court in Ohio ruled that employers are not liable for the overtime pay under the home-care rule while the injunction was in place, “but a district court in New York held just the opposite,” Jackson Lewis said. On Oct. 13, 2016, the New York federal district court granted a request for an appeal to the 2nd U.S. Circuit Court of Appeals.

Regarding the overtime rule that was blocked, an appeal was likely, Jackson Lewis. The Labor Department said it was considering its legal options.

If the decision were reversed on appeal, and if “the employer has not been in compliance on the December 1 effective date, a thorny question arises: whether the existence of the preliminary injunction precludes any liability between the Dec. 1, 2016, effective date and the date the Court of Appeals issues its decision,” the law firm said.

For employers that have notified employees of a salary increase effective by Dec. 1, “it may be too difficult to undo that change or communicate that the change will not be made,” Jackson Lewis said.

For other employers, options remain. Legally, unless an employer entered into a binding employment contract with a worker providing the salary increase, “nothing would preclude an employer from rescinding the salary increases that were scheduled to go into effect next week for employees who were told they would receive a salary increase to maintain their exempt status,” said a Nov. 23 report of the website of New York Labor and Employment Law.

“Employees who have been told that they will be reclassified from exempt to nonexempt status can certainly be told at this point that they will remain exempt employees,” as long as their duties qualify them for a white-collar exemption, the report said, noting that from a human resources standpoint, clear and prompt guidance about the change should be issued.

But stepping back from such changes raises the question of whether, if the case were appealed, the preliminary injunction would excuse employers from liability from Dec. 1, 2016, to whenever an appeal ruling were issued.

Considerations also include whether to gamble on the incoming administration of President-elect Donald Trump  blocking the final rule by signing congressional legislation, or directing the Labor Department to abandon an appeal or to rescind the rule, Jackson Lewis said.

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