DOL Salary Increase Enjoined: Cause of Celebration or Concern?

As most of us know, on 11/22/2016, Federal Judge Amos Mazzant in the Eastern District of Texas issued an order which eliminated the obligation to increase the salary for exempt employees to $913/week on 12/01/2016.  That’s cause for celebration.  But we know that the DOL will appeal to the Fifth Circuit Court of Appeals. If the decision is reversed by the Fifth Circuit, and employers are not in compliance on the December 1 effective date, the question remains: does the preliminary injunction precludes liability between the December 1, 2016, effective date and the date the Court of Appeals issues its decision?  That’s cause for concern.

This question has been in front of a few courts in the context of another DOL regulation that was invalidated by a district court, but later reversed on appeal. That regulation concerned the availability of the companionship exemption to home healthcare workers employed by third parties. In December 2014, the Home Care Association of America sued the DOL in the District Court for the District of Columbia, seeking to enjoin enforcement of the rule, and the district court vacated the rule.  Approximately eight months later, the D.C. Circuit Court of Appeals reversed the district court decision. Some employers, relying on the district court’s injunction, did not pay overtime. 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. One district court in the Southern District of Ohio held the employer is not liable during the period the injunction was in place (Bangoy v. Total Homecare Solutions, LLC, No. 15-575 (S.D. Ohio. Dec. 21, 2015)), but several other federal courts, including those in Arkansas, Iowa and New York found just the opposite.  Cummings v. Bost (Iowa 2016) notes “that it strikes the Court as far more unfair to allow Defendant to escape liability for near a year’s worth of overtime wages based on a district court decision that was ultimately deemed to be error.” 

All is not lost.  Since the DOL first announced its proposed rule, various bills have been introduced in Congress to block the rule entirely, delay its implementation, or stagger the increases over time.  President Obama said he would veto any of these bills, even if they were passed. But the Trump Administration could view such legislation differently, and President-elect Trump could sign such legislation if it is passed by the next Congress. If an appeal from the district court’s decision is still pending when such legislation is passed, the appeal may become moot, particularly where the legislation invalidates the rule from the proposed effective date. The Trump Administration also might direct the DOL to abandon the appeal.  Stay tuned.