As the nation waited for the final states to be called in the early morning hours on Wednesday, we here at the Wage & Hour Litigation Blog focused on our one thing: what impact would the result have on the DOL’s overtime exemption regulations scheduled to go into effect on December 1, 2016? How does the election of a Republican House, a Republican Senate, and President-Elect Donald Trump change what employers should be doing as we speed towards the December 1 deadline?
The short answer is that — at least for the near-term — employers should continue the same way as they have been, with a laser focus on being in compliance by December 1.
That being said, there are a couple of ways that the regulations can be stopped before December 1. And there are a couple of others that may change the game after December 1.
The first path is through the Eastern District of Texas. As we have reported previously, 21 states and dozens of trade associations filed separate lawsuits (which since have been consolidated) challenging the overtime exemptions rules on a variety of grounds. A hearing on the states’ motion for injunctive relief is scheduled for next week, on November 16. The trade associations are being permitted to participate as amici in the states’ case, and also have filed an expedited motion for summary judgment. It is possible that the judge will enjoin the rules in advance of the December 1 effective date. As is the case with most litigation, however, that result is less than certain.
A second pre-December 1 path to stopping — or at least delaying — the overtime exemption regulations is through Senator Alexander’s Overtime Reform and Review Act, S. 3464. That bill would — by statute, not by regulation — increase the salary level to $692 per week on December 1, 2016, then increase it again in 2018, 2019, and 2020 until it hit $913/week. The bill also contains special provisions protecting nonprofit, state and local government, and education employers from salary increases unless certain conditions are met. Although the Senate has been expected to take up the bill upon return to Capitol Hill, the short legislative calendar and the threat of a veto by President Obama pose significant hurdles to relief before the December 1 deadline.
Once we get into 2017, there are additional tools at the disposal of Congress and a Trump Administration. With the new salary level taking effect nearly eight weeks before Inauguration Day, however, there will be substantial political calculations involved in any use of those tools.
One tool is the seldom-used Congressional Review Act, a law that allows Congress to review and disapprove new agency regulations within prescribed time periods. Congress could pass a “resolution of disapproval” of the new regulations that would have the effect of rescinding the rules. Under the CRA, any regulation issued within the final 60 legislative days before Congress adjourns sine die is treated as having been issued on the 15th legislative day of the next session of Congress. This allows the CRA resolution to be considered by the new Congress and, in this case, the new President, which makes it much more likely that the resolution will be successful. Because the final 60 legislative days can be counted only in retrospect, the regulations that might be subject to this procedure are unknown. An early estimate placed the “deadline” at May 16, 2016. The overtime exemption rules were issued on May 23, 2016, which would place them within the review period. Whether they actually fall within that period depends on how much Congress is in session over the coming weeks. Assuming the overtime exemption rules fall within the relevant period, in the next session of Congress, and after January 20, 2017, President Trump could sign the CRA resolution, which would make it as if the rules never existed.
Finally, we could see rulemaking by the Trump Administration, such as a notice-and-comment rulemaking revising the salary level downward and/or eliminating the three-year automatic update provision. Going through the notice-and-comment process would be time-consuming and likely would not result in any relief on the salary level until well into 2017, at best.
Ultimately, employers should continue their efforts to be compliant by December 1. There are far too many variables at this point to conclude otherwise.