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TPP: Trump Backs Out of the Trans-Pacific-Partnership

Trump is no stranger to making controversial headlines and his recent decision to withdraw the United States from the Trans Pacific Partnership agreement is no different.  Obama spent the last 7 years negotiating the deal, so the decision comes as a blow to those loyal to the Obama administration.

The agreement was designed with the hope of eventually creating a single market, which would be similar to that of the European Union.  Since Trump has pulled the U.S. out of the agreement, the TPP will be nearly impossible to ratify as is; the agreement required all 12 countries to ratify within a 2-year period.  For those nations wanting to renegotiate a trade deal without the U.S., other key players, such as Japan, say U.S. participation was the carrot on the stick.

What is the Trans Pacific Partnership Agreement?

The TPP was a trade agreement between nations consisting of 40% of the world’s trade market: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States.

If you’re not familiar with trade agreements, they’re treaties between two or more nations agreeing on terms of trade between them.  These agreements are typically aimed at reducing or eliminating tariffs, quotas, and other trade restrictions.  The intention is to grow economies by increasing the trade of goods and services between the nations party to the agreement.

TPPOf course the TPP agreement focused on reducing tariffs, but it went beyond the standards of the World Trade Organization and focused on negotiating labor, environmental and intellectual property protections as well.  Here’s a few highlights of what the TPP would have done:

  • Trade barriers. The TPP agreement would have cut over 18,000 tariffs on all U.S. manufactured goods and farm products.  The agreement also would have mandated expedited customs procedures.
  • Environmental protection. The TPP is argued by some to be the most environmentally friendly trade deal ever negotiated, as the agreement requires signatories to commit to take appropriate measures to protect and conserve wildlife.
  • Good governance. The TPP agreement required all signatories to join the United Nations Convention Against Corruption, which is focused on criminalizing bribery of public officials and the general governance enforcing anti-corruption laws.
  • Intellectual property. The TPP would have required signatories to establish uniform standards for patentability and copyright
  • Labor standards. The agreement would have enforced obligations to protect the freedom to form unions, as well as enforce fair labor practices.
  • Investor-state arbitration. The TPP would have granted investors the right to sue foreign governments for violating the treaty.

The Good and the Bad

Of course there’s two sides to every story.  Critics of the TPP applauded Trump for withdrawing from the agreement, arguing withdrawing will bring jobs back to America.  Proponents of the TPP feel the withdrawal will give China more control over the Asian market.

Since tariffs would have been reduced on industrial goods, Japanese car companies such as Toyota and Honda would have had cheaper access to the U.S., while vehicles exported from the U.S. could have increased because of new access to markets such as Vietnam.  Cuts on poultry, beef, dairy, sugar, wine, rice and seafood would have benefited several agricultural companies.

International labor laws were negotiated as part of the agreement, which is a major benefit for less developed countries, however, many argue this would have resulted in job losses from developed countries like the U.S.  The agreement is said to not be favored by pharmaceutical companies because the intellectual property rights were too lenient.  Additionally, those against the agreement urge it would have driven up prescription costs and, thus, left many without the means to afford life-saving drugs.  Decreased global roaming charges seems like a great idea, however, this could lead to increased competition between telecommunication companies and end up resulting in higher prices for consumers.

What’s Next for the U.S. and Trade?

As part of his “America First” stance, Trump promised throughout his campaign to be more aggressive against foreign competitors and backing out of the TPP agreement draws a stark line.  This global cooperation attitude risks doing more harm than good.  There’s been threats of increasing tariffs up to 10% on all foreign imports, not to mention Trump’s most recent plan to tax Mexican imports 20% in order to pay for construction of the border wall, which risks starting a trade war with other countries that could ultimately result in a financial spike in consumer goods.

Bieber and Usher “Usher” Out Copyright Claims

Many of the most famous musicians have faced high-profile copyright cases accusing them of stealing their music from another artist. From Led Zeppelin to the Beatles to Skrillex to the guy who wrote the Ghostbusters theme song, the list of musicians who’ve stared down a copyright infringement claim is a long on indeed,  In the last few years, Usher and Justin Bieber have been dealing with their own copyright infringement lawsuit.  The two were accused of stealing parts of their collaborative song “Somebody to Love” from an identically titled song written by two Virginia artists–Devin Copeland and Mareio Overton.

Understanding the Claim

Mr. Copeland and Mr. Overton wrote their own “Somebody to Love” back in 2008, two years before Usher and Bieber came out with their song in 2010 which then went on to peak at No. 15 on the Billboard Hot 100.  Copeland and Overton argued that Bieber’s song’s chorus
was incredibly similar to their own work and demanded $10M from the two artists.  However, the courts disagreed.  The case was dismissed, sent back down for reconsideration after appeal and Bieber and Usher finally succeeded in having the copyright lawsuit against them dismissed once and for all just a few weeks ago. 

The court’s decision revolved around the inability of the plaintiffs to show that Justin Bieber had access to their song before he wrote his own version–a fundamental element of proving copying in a copyright infringement case.  However, in order to truly understand the ruling it is necessary to understand exactly how copying is shown when somebody is accused of infringement.

Justin Bieber Copyright Claims

How to Put the “Copy” in Copyright Infringement

In order to succeed in a copyright infringement case you have to establish that the person you’ve accused of infringement, lo and behold, copied your protected work.  This makes sense, if you can’t show that a defendant copied from you, then why are you in court?  However, the evidence required to show copying has two parts.  First, you need to show that the accused work is similar to yours.  If it isn’t, that’s not exactly a copy is it?  Second, you need to show that your defendant had access to your work.  Once again, if they never saw your work how could they have ripped you off?

So we have our two elements but, like most things in law, it’s more complicated than that.  The two elements, similarity and access, are analyzed on a sliding scale.  The more proof of similarity, the less evidence you need of access and vice versa.  To add one more wrinkle, it was established in a case against the late Michael Jackson (and reaffirmed when the Isley Boys later sued Michael Bolton) that if the two works are similar enough you don’t actually need any evidence of access because the court is willing to presume that a defendant copied your work if it’s similar enough to what you made originally.  This is a concept known in law as striking similarity, courts look to a number of things to decide if two works are this similar but common examples would be where your work had particularly unique qualities that were copied nearly verbatim or that you messed something up in your work and they were dumb enough to copy your error.

In Bieber’s case, Mr. Copeland and Mr. Overton tried to establish striking similarity–arguing that the chorus of their version of “Somebody to Love” had a near identical chorus to the one put out by Bieber and Usher.  Unfortunately for them, their judge didn’t agree.  Thus, while they could show some level of similarity, they were required to produce evidence that Bieber or Usher had actually listened to or been exposed to their 2008 song before they wrote their own version in 2010.

Access Hollywood: A Star-Studded History of How to Prove Access

Unlike similarity, no matter how evidence of access you have you always need to show at least a little bit of similarity.  Otherwise if enough people see your work, anything they made would be copyright infringement.  However, just like in the Bieber case, it is frequently a crucial sticking point in copyright cases as it can be hard to prove at times.  Over time, exactly what is acceptable as evidence of access has been refined–often in cases featuring some particularly famous names.

First and foremost, the evidence required is a sliding scale.  The more similar the works, the weaker the evidence of access that is required.  For instance, there have been cases where evidence as weak as the fact that a work was published to the internet–and the defendant had internet access–was enough.  Where a work is particularly famous and widely distributed, that can also be evidence enough to show access.  However, just a few years ago a case dealing with the script to the Matt Damon’s Sci-Fi movie Elysium established that, just because something is posted to the internet once, that doesn’t by itself show that a work was widely distributed and won’t always be enough evidence to establish access.  This served as a counter point to a lawsuit brought by the developers of Angry Birds, where being posted online and subsequently downloaded approximately a billion times was enough to show widespread distribution.

In the internet age, availability online is often central to establishing access.  However, the cases above leave you with the helpful understanding that a single post is generally not enough to show access but content posted and then downloaded a billion times is.  Just to fill in the small gaps in the middle there, a couple factors to think about are how often something is viewed or shared, how publicly available the internet content is, how popular the site the content was posted on is, and how high the content appears in search results.

Also important in understanding access is the fact that copying does not need to be done consciously.  This was established in a case brought against George Harrison of Beatles fame.  His song “My Sweet Lord” led to a lawsuit as it was nearly identical to another song called “He’s So Fine.”  Harrison admitted that he knew of the song and had heard of it, but said he just wasn’t thinking about it when he wrote his own song.  The court, in a nearly apologetic ruling against the rock star, said that just because you weren’t intentionally copying or thinking about the work at the time, the subconscious knowledge of the work through previous access is sufficient to show copying.  This was highlighted more recently when Marvin Gaye’s children sued Robin Thicke.  Thicke testified that he was so high while the song was written that he could not have possibly recalled Gaye’s work–although he did admit Gaye was an inspiration to him.  This was irrelevant to access. however, as the actual access itself was all the evidence needed. 

Finally, a particularly common type of confusion in access cases dealing with music deals with cases where an artist gave their song to music industry executive who works with an artist who later makes a similar song.  Unless there is actual evidence that the executive showed that song to the artist accused of infringement, a devilishly tricky thing to find, there’s generally not enough there to establish access.

Ultimately, Why the Case Failed

Mr. Overton and Mr. Copeland were trying to argue just that, saying that they had given their songs to music executives working alongside Bieber and Usher.  However, they couldn’t produce any evidence of those executives passing on anything to Usher or Bieber.  What’s more, their song wasn’t particularly widely distributed–either over radio, the internet, or other methods.  They were left in a situation where they couldn’t show that either singer had ever even heard of their work–and that killed their case.  Bieber and Usher claimed that their song was based on a November 2009 song by a woman named Heather Bright with which they had previously reached an agreement to use her work.  Overton and Copeland simply couldn’t prove otherwise.

Driving With FaceTime: Apple Faces Lawsuit from Grieving Family

Talking on a hand-held cell phone while driving. Texting while driving. Both of these activities are major causes of accidents that have now been banned in most states. However, with the development of technology, a new problematic activity has emerged: engaging in FaceTime while driving. FaceTime is Apple’s video-chatting program, and it is a standard part of the latest versions of the iPhone. Not only does the program require hand interaction in the form of holding the device and interacting with the device’s interface to commence and end a FaceTime session, but it also requires visual attention because of the video aspect of the program. Since using FaceTime requires a person to both continuously look at the device and hold/physically interact with the device, using FaceTime while driving is arguably more dangerous than texting while driving and talking on a hand-held cell phone. However, using Facetime while driving is currently not a crime in any state, nor has Apple, the company behind FaceTime, taken any steps to discourage users from using it while driving. That may all change soon now that a family in Texas is suing Apple over a car accident that was caused by a driving using FaceTime.

Apple iPhone FaceTime

On Christmas Eve of 2014, Garrett Wilhelm crashed into the Modisette family’s car while engaged in a conversation using FaceTime on his iPhone 6 Plus rather than paying attention to traffic. All four members of the Modisette family suffered from serious injuries, and one for the two young daughters ended up dying from her injuries. At the scene of the accident, Mr. Wilhelm admitted to the police that he was using FaceTime when he crashed into the Modisette family’s car and the police noticed that FaceTime was still running on Mr. Wilhelm’s iPhone 6 Plus after the accident, which suggests that the use of FaceTime helped cause the accident.

Holding Apple Responsible for FaceTime’s Role

The Modisettes filed a lawsuit against Apple for the role that FaceTime played in causing the accident. They have accused Apple of being negligent in the design of FaceTime by failing to include either a warning to users alerting them to the dangers of using FaceTime while driving or a mechanism that would allow for FaceTime to become disabled when the device containing FaceTime is in a moving vehicle. What makes Apple’s failure to include either a warning or disabling mechanism even more noticeable is the fact that prior to the release of the iPhone 6 Plus, Apple was granted a patent for a electronic device mechanism that would disable certain distracting features within the electronic device, such as texting and video chatting, if the mechanism sensed that the device was traveling at or beyond a certain speed that would indicate that the device was in a vehicle.

How Can Manufacturers Be Held Responsible?

Manufacturers owe a duty to consumers to create safe products. If a product can be made safer without sacrificing any of its essential aspects, then the manufacturer is obligated to change the way that it makes the product to include the new additional safety measures. If a manufacturer keeps making the product in the same manner as before without implementing the changes to make it safer, then the manufacturer has used a defective design and is liable for any harm that may result from the product with the defective design when that product is being used in a way that is either intended by the manufacturer or reasonably foreseeable by the manufacturer.

Apple knew that iPhone owners used their iPhones while driving, including for texting and chatting purposes. In fact, that knowledge is why Apple created the mechanism for which they sought the patent, according to the background information in the company’s patent application. Since the patent application was granted in April 2014 and the iPhone 6 Plus was initially released in September 2014, Apple was in possession of a patent for a mechanism that would have disabled iPhone owners from being able to use their iPhones in a distracting manner while driving months before Mr. Wilhelm could have purchased his iPhone 6 Plus. Thus, not only was Apple aware of the current dangerous design of the iPhone in lacking a mechanism to disable certain features of the iPhone while the owner is driving, it was also aware of a way to make the iPhone with a mechanism that would disable certain features in the iPhone while the owner is driving. Despite this knowledge, Apple did not implement the safer design that would have included the mechanism when manufacturing the iPhone 6 Plus. Thus, Apple’s iPhone 6 Plus contained a design defect for which Apple is liable.

But Can Apple Really Be Liable for a Car Accident?

Since Apple is liable for the defective design of the iPhone 6 Plus, they are then liable for any harm that may result from a reasonably foreseeable use of the iPhone 6 Plus that may have been avoided if the safer design was implemented. Apple should have reasonably foreseen that Mr. Wilhelm would have been using FaceTime on his iPhone 6 Plus while driving because the company stated its awareness of drivers using cell phones while driving in the patent application. Mr. Wilhelm would likely have been unable to use FaceTime on his iPhone 6 Plus if Apple had manufactured the device with the disabling mechanism. However, since that safety mechanism was not present in Mr. Wilhelm’s iPhone 6 Plus, Mr. Wilhelm engaged in distracted driving and crashed into the Modisettes’ car. Thus, it is likely that Apple is liable for Mr. Wilhelm crashing into the Modisette’s car and the subsequent damage that resulted from the crash.

If the court does find Apple liable for the car crash involving Mr. Wilhelm and the Modisettes, then the court will likely require Apple to provide financial compensation to the Modisette family and order Apple begin implementing the safer design featuring the disabling mechanism. The compensation that the Modisettes may receive from Apple will likely include quantifiable damages such as incurred medical costs and the cost of repairing or replacing their car, as well as more speculative damages such as money for the loss of companionship due to the daughter’s death and pain and suffering. Additionally, Apple may be required to pay punitive damages, which are damages designed to punish defendants for terrible behavior, because Apple was already in possession of a patented way to make the iPhone 6 Plus safer before it was manufactured and yet chose to still manufacture the iPhone 6 Plus with the less safe design.

What Can Consumers Do to Protect Themselves?

Manufacturers should always make their products as safe as is feasible. If they fail to make products that are safe to be used as is foreseeable, then they should be held liable for causing harm to consumers. You should contact a defective products lawyer if you have been harmed by a defective product. A lawyer can assist you in talking to the maker of the defective product about compensating you for your injuries and filing a lawsuit if necessary.

Can Marijuana Businesses Survive the Trump Administration?

One of the most notable trends of the most recent election was the explosion of laws legalizing recreational and medical marijuana across the nation. In fact, while only 8 states currently allow recreational use, the majority of states have legalized the use of marijuana in one form or another. This explosion has caused a chain reaction, a matching eruption of businesses prepared to sell marijuana products wherever it is legal.

One of the largest of these companies is Dixie Brands, an enormous Colorado-based business. Dixie Brands, founded in 2010, currently has branches operating in Arizona, Colorado, California in Nevada. They have in the news recently for their desire to spread nationwide with planned expansions to Maryland, Oregon, and Washington.

Marijuana Business

However, operating and expanding as an operation in the business of selling a product that is federally illegal is understandably extremely complicated. Not only does each state have its own notably different set of laws on how a business must operate but federal law bars marijuana companies from a number of things most businesses would consider necessary to operate. In fact, the majority of the growth of the industry is predicated off the hands off approach of the federal government under the Obama administration.

Marijuana Businesses Under President Obama

In August of 2013, the Obama administration issued a memo stating that it would not interfere with legal cannabis business so long as they operated in states with fully fleshed out regulatory regimes for such businesses such as Colorado. In December 2014, President Obama signed a bill into effect which limited how the Justice Department could stop states from putting their own rules into effect when it comes to marijuana.  In a recent interview, President Obama went so far as to say that he believes that marijuana should be treated as a health issue in same vein as cigarettes and alcohol. He went out of his way in the same interview to note that polls show that the majority of people who voted for President-elect Trump feel the same way.

What They Might Face Under President Trump

These comments come after Trump has picked Sen. Jeff Sessions as his top choice for U.S. Attorney General–a particularly controversial pick.  Senator Sessions was nominated for a position as a federal judge by President Reagan in 1986. However, a Republican led Senate Judiciary Committee refused to appoint him after a number of racist comments and opinions came to light. Senator Sessions referred to the NAACP as “un-American,” repeatedly called the African-American Assistant United States Attorney Thomas Figures “boy,” and–perhaps most relevant for the state of marijuana law across the country–said that he thought the KKK were good people “until I learned they smoked pot.” While President-elect Trump has previously supported a hands-off approach to marijuana, his pick of Senator Sessions for U.S. Attorney General certainly points in a different direction–much to the chagrin of companies like Dixie Brands.  Senator Sessions is, as you can probably tell from his statements about the KKK, extremely outspoken in his opposition towards marijuana as a whole. Senator Sessions has stated that “one of [President Obama’s] great failures …is his lax treatment and comments around marijuana.”  He has been quoted as saying “We need grownups in Washington to say, ‘Marijuana is not the kind of thing to be legalized, it ought not to be minimized, and that it’s a real danger.'” He has even gone so far as to say “good people don’t smoke marijuana.”

All of this points to a potential change in stance from the incoming administration; the kind of change in stance that could be catastrophic for a business like Dixie Brands and the entire industry they belong to. So what exactly are the legal obstacles currently facing businesses based around marijuana products and how can a firmer line on marijuana make things even worse for these businesses?

The Legal Roadblocks of Selling Legalized Marijuana

First and foremost, the obvious elephant in the room.  Marijuana is federally illegal. Federal law supersedes state law when the two conflict. Thus, so long as marijuana remains criminal at the federal level the entire business could come crashing down in a matter of months or weeks with just a few changes to enforcement and federal laws. Supreme Court cases have shown that even personal use or cultivation of marijuana within a single state has sufficient impact on the nation as a whole to allow for enforcement of federal laws despite contrary state law. The bill signed by President Obama protecting such state laws from interference could be easily overturned by a conservative Congress with the mind to do it. If the choice of Senator Sessions as U.S. Attorney General signals an administration in line with his way of thinking, action such as this may well be in our future.

So, to say that the marijuana business is on shaky ground is a bit of an understatement. However, businesses such as Dixie Brands are used to operating on shaky grounds. The nature of their business has always involved some level of legal headaches in areas such as intellectual property, forming binding contracts and advertising. However, there are some legal issues that are even more fundamentally problematic for companies selling marijuana products.

Legal Transportation of Marijuana

One of the biggest of these headaches is that federal law makes it illegal to transport marijuana across state lines–interstate commerce is generally the realm of the federal government and the federal government says marijuana is illegal. The federal government can even prosecute people transporting marijuana from one legal state to another. The penalties for a violation of these rules are hefty–up to five years in prison or fines of up to $250,000.

This is especially relevant now that the entire block of states along the west coast all have legalized marijuana. In a normal franchise, standardizing providers and shipping equivalent quality goods to all your branches is standard practice.  However, this is illegal for marijuana companies and requires these companies to find a different legal provider of marijuana in every state they operate in. While some states have made it clear that enforcing these laws at their borders is not high on their priority list for single persons, this doesn’t necessarily apply for a larger business shipping large quantities and doesn’t prevent federal operatives from intervening.

What About Banking for Marijuana Businesses?

Another common issue facing businesses selling marijuana products is banking.  The fact that marijuana is, once again, illegal at a federal level has made most banks very hesitant to accept any money from a marijuana-related business. The problem is that this money is essentially earned through committing a federal crime and banks are fearful they may lose their required FDIC and NCUA insurance as both of these are provided by the federal government. Even worse, by working with a business like Dixie Brands a bank could face a lawsuit brought by the federal government.

Back in February of 2014, a division of the U.S. Department of the Treasury known as the Financial Crimes Enforcement Network (FinCEN) has created guidelines under which a bank may safely work with a marijuana-related company. These rules made it so that banks could work with companies selling marijuana so long as they file frequent Suspicious Activity Reports proving that the people they work with aren’t committing fraud or laundering money. However, while the rules made it technically legal to work with a company marijuana products, they also make it so expensive and time consuming to do so that no bank actually chooses to take FinCEN up on the offer. What’s more, these guidelines are not actually binding law but merely recommendations. This means that a change in position from the federal government, such as the one that looks to be on the horizon, would leave any bank following the FinCEN guidelines hung out to dry in a potential legal crackdown.

This issue has led to two things.  First, the marijuana industry is primarily a cash industry with all the problems that brings with it.  The interstate nature of credit cards, electronic payments, electronic transfers, PayPal and similar services tender all these payment methods unavailable to marijuana-related businesses. There are stories of owners of marijuana-related businesses coming to pay their taxes with sacks and sacks of cash like a Scrooge McDuck cartoon.  Second,  states have been forced to try and design their own internal banking services to help regulate the businesses they seek to tax.  Some of these, such as the newest regulations out of California, will only be taking effect later this year.

Is This the End of Expanding Marijuana-Related Businesses?

There is, unquestionably, an enormous amount of tax revenue to be made and jobs that could be created through legalized and regulated marijuana in the U.S.  However, the stance of those the incoming administration has chosen to represent them is not a friendly one to legalization.  There are certainly arguments in favor of this side of the argument as well–difficulty of enforcement, difficulty in proving current intoxication, etc.  However, as it stands the public opinions of the incoming Trump administration are incongruent.  President-elect Trump himself has been publically supportive of the growing marijuana industry.  The man he has chosen to weigh in most influentially on the current laws of the federal government, however, has a diametrically opposed position.   The marijuana industry is, and has been, an incredibly profitable house of cards–we’ll have to wait and see if the Trump administration chooses to blow it over.

Overtime Law Changes: How to Protect Your Business and Rights

Early in 2016, at the direction of President Obama, the Department of Labor (DoL) issued long awaited reforms to how overtime would be handled across the country.  The new rule, inventively called the Overtime Final Rule, is only the seventh time the Department of Labor has adjusted its rules for the changing times since nearly 80 years ago in 1938.  It would also be the first such adjustment in twelve years.  However, while the rule was initially set to take effect at the beginning of last month, the it’s looking more and more like the Overtime Final Rule may be even more long awaited than expected.  A ruling out of a Texas district court, temporarily preventing the Overtime Final Rule from moving forward, was recently upheld on appeal. 

Overtime Law Changes Department of Labor

What Does the Rule Cover?

So first things first, what exactly would the Overtime Final Rule do and why would anybody try to stop it?  The Overtime Final Rule was designed to update the salary exemptions to overtime.  Basically, if you make more than a certain amount–and your job requires a fairly high level of independent judgment and discretion on your part–an employer doesn’t need to pay you for overtime hours worked.  Overtime generally includes any hours in excess of 40 in a week, 8 hours in a day, or being required to work more than 6 consecutive workdays.  The Overtime Final Rule would have nearly doubled the cutoff point in pay before you are exempt from overtime.  The new cutoff would have jumped from exempting anybody making more than $455 per week all the way up to only excluding employees making $913 per week.  This amount would rise every year for the next three years to allow employers more time to adjust to the changes.  The DoL expected this change to make around 4.2M employees eligible for overtime pay around the country.   The new rule also sought to clarify the fairly murky area of the exact kind of jobs that can be overtime exempt.  However, it was the fact that it would require employers to make such huge changes in how they pay their employees that led to it being challenged as vigorously as it has been.  While rule may leave many employees excited about the prospect of a potential raise or overtime pay, the same prospect filled many employers with dread at having to budget in those changes as the DoL predicted that 4.2M new non-exempt employees would cost employers over $295M.

The response to the rule when it was first announced in May of 2016 was swift–a barrel of lawsuits against the DoL, its divisions, and its agents.   21 states, the Plano Chamber of Commerce and over 50 different businesses all sued in Texas District Court to try and put a stop to the new changes by arguing that the changes overstepped the DoL’s authority.  This led to Judge Amos Mazzant out of Texas issuing an unexpected emergency motion, days before the Overtime Final Rule was set to take effect, which prevented rule from moving forward anywhere in the country.  The federal government has appealed the ruling but until that case sees light–it’s currently in briefing until at least January 31st of this year–the Overtime Final Rule is stalled.

Is This the End of the Overtime Final Rule?

To call the Texas District Court’s ruling a setback to the DoL would be a dramatic understatement.  The case is still ongoing, upcoming decisions in the case include a request to stop the rule permanently.  However, as it stands the rule is stalled not dead–although the changing political climate may see the DoL abandon the case entirely.

With President-Elect Trump set to take office in a few weeks, there will be a changing of the guard at the DoL and until that changing of the guard it’s very unlikely there will be much action on the case.  Once the changing of the guard does occur, President-Elect Trump has appointed Andrew Puzder as his Labor Secretary–an outspoken critic of the Overtime Final Rule.  With this in mind, it seems unlikely that the case will be a high priority for the new administration and it may even be dropped–ending any chance of the DoL’s overtime changes taking effect.  Even if the case moves forward and the rules end up taking effect, a conservative majority in Congress would allow Republicans to kill the rules using a joint resolution under the Congressional Review Act.   

However, while things aren’t looking particularly good for the DoL’s rules, the case is far from over.  The Texas AFI-CIO–a prominent labor union–is currently seeking to join the case as a defendant in order to take over the case should the DoL end up walking away from it.  What’s more, the Congressional Review Act is an option that is very rarely used.  There may be life in the Overtime Final Rule yet.  So how do you plan for a future where the legal environment is totally up in the air?

What Do You Do Now?

So how do you move forward as a business?  Many have been busily preparing to adjust for the changes, however that in and of itself presents a challenge to employers.  What’s more, failure to properly classify an employee when it comes to overtime exemption can lead to costly lawsuits and fees.

The two options to deal with the changes is to either provide raises or reclassify employees.  Raises hit the bottom line while reclassification hits employee morale through the perceived loss of prestige and can require removing autonomy from an employee–sometimes even necessitating barring that employee from activities such as accessing emails while off duty.

As it stands, the Overtime Final Rule is simply not in effect and thus employers do not need to currently comply with its rules.  However, the injunction did not block all amendments the rules proposed–keeping sections increasing the cap on overtime exemption for particularly highly paid employees from $100,000 per year to $134,000 per year.  Thus, it’s important as an employer to be certain that employees exempted on this basis are properly classified. 

As to the remainder of the rules, there are basically two camps–employers who have already made changes to address the Overtime Final Rule and those who have not.  If you’ve made no changes, it makes sense to stay the course for now while preparing a plan to quickly move yourself in line witht he rules should they end up taking effect.

If you have made changes, the situation is a bit more complicated.  Rescinding raises and employment changes can be a tricky business, beyond the fact that it’s a painful HR move, it can give rise to legal claims against your business depending on how salaries or pay were agreed to.

As an employee it is important to keep an eye on where this law goes and make sure you are being compensated properly according to the law.  If you have been reclassified or given a raise, look to your employment agreements and figure out whether your employee can take back what they’ve given you.  What’s more, remember that an employer can rarely take back wages already paid under a restructured compensation plan.  Generally they will be limited to reducing future pay.

Surprisingly, businesses have by and large moved forward as it the ruling from Texas never happened.  Studies show the majority of small businesses–84% of them–have simply moved forward with raises, reclassifications, and employment agreements as if the rules had taken effect.  This is good news for employees.  However, many small businesses can ill afford the costs of such changes if they don’t have to.  For employees and employers alike, keep an eye on this case in the coming months–it has to come out of legal limbo sometime.