Court Puts The Brakes On New Overtime Regulations

By now, most employers had already implemented or were posed to implement the United States Department of Labor’s (DOL) new overtime rules aimed at swelling the ranks of employees eligible for overtime payments. The rule increased the salary threshold to qualify for the executive, administrative or professional overtime exemptions from $23,660 to $47,476 per year. As a consequence, employers were faced with the prospect of many employees who were previously exempt from overtime requirements being overtime eligible when the rule were scheduled to go into effect on December 1, 2016.

However, in a surprise 11th hour development last Tuesday, a Judge in the U.S. District Court, Eastern District of Texas issued a national preliminary injunction staying implementation of the new DOL rules. The injunction is not a permanent injunction, but merely preserves the status quo until the court can review the merits of arguments by the challenging parties that the DOL overstepped its authority in raising the salary basis test for exemption. Pending a further decision from the Eastern District or an appellate court, employers need not comply with the new salary requirements. While employers generally champion the ruling, the DOL is expected to file an appeal.

What’s an employer to do? For those employers who had yet to take final steps aimed at meeting the new overtime requirements, further action should be delayed until this issue winds its way through the courts. Unfortunately, in anticipation of the regulations many employers notified salaried staff that going forward they would be paid on an hourly basis and be overtime eligible, or alternatively, bumped up the salary of key employees to meet the increased salary basis and preserve the overtime exemption, actions that may not be readily reversed by the employer. Employers should consult with employment law counsel for further guidance on this new development. In all cases, employers cannot assume that the new overtime rules are permanently shelved, and should have a compliance plan in place should the new regulations be revived.