Texas Judge Blocks Overtime Rule

Breaking news out of the State of Texas, the U.S. District Court of Texas has granted a preliminary injunction against the Fair Labor Standards Act (FLSA) overtime rule (click here to view the injunction). The presiding Judge the Honorable Amos Mazzant found in his opinion that the lawsuit filed by 21 states and a variety of employer groups, were able to effectively show “irreparable harm” if the rule were to go into effect. The rule has been halted for the time being and will not go into effect on December 1, 2016, giving employers a reprieve. The Department of Labor is likely to appeal the decision.

On September 20, 2016, 21 states filed a lawsuit in federal court to halt the implementation of a new Obama Administration rule on overtime pay. Also on September 20, 2016, the U.S. Chamber of Commerce led a group of 50 business associations in East Texas to file a similar suit in the same court. The Court quickly consolidated the cases, and a single hearing was held on November 16, 2016, to determine if the Court will intervene in the implementation of the overtime rule.


On May 18, 2016, the Obama Administration announced the details of its final rule on federal standards for exempting workers from overtime pay. The new rule would have increased the salary level under which workers are eligible for overtime pay, from $455 per week ($23,660 per year) to $913 per week ($47,476 per year), and allow for this threshold to be automatically adjusted every three years. Additionally, the higher salary threshold for exempting “highly compensated employees” from overtime pay would have been raised from $100,000 per year to $134,004 per year, and employers may include bonus compensation as up to 10 percent of an employee’s salary for purposes of calculating non-“highly compensated employee” pay (previously this pay was excluded from calculation).

The updated overtime rule would have gone into effect on December 1, 2016, for all employers. The Administration’s changes to the rule came after an initial proposal in 2015 which would have increased the lower salary threshold to $50,440 for a worker to be eligible for overtime.

Business organizations such as TIA, the U.S. Chamber of Commerce, the National Retail Federation, and others have opposed the increase on the grounds that these salary thresholds will harm private-sector employment and make workplaces less flexible for employees. This dramatic increase would have also significantly impacted non-profit organizations, as well as colleges and universities, which will struggle to find the funding to provide additional pay to dedicated employees. Further, this rulemaking would have a disproportionate impact on employers in rural areas or parts of the country where costs of living are lower and where few salaries reach the exemption level. Employees in those areas would have been forced to work on an hourly basis as a result of this rulemaking.