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Overtime Pay Rule Changes Halted by Federal Court

One of the most controversial labor-related overtime pay regulations in recent years has been put on hold, at least for now; but the unanticipated decision to block the Department of Labor’s (DOL) overtime rule has employers scrambling to determine whether they can reverse compliance plans.

On November 22, a federal judge blocked the DOL’s overtime rules, set to take effect December 1, which would have required, among other things, that employers pay employees that qualify to be exempt executive, administrative, or professionals (referred to as the EAP exemption) a minimum salary of at least $921 per week or $47,892 annually, thereby allowing more employees (i.e., non-exempt or those employees not at the $47,892 salary level) to be eligible for overtime.

This is a victory for small business owners who haven’t yet communicated to employees that a change was coming and should give them some breathing room until the case can be properly adjudicated. Unfortunately, this ruling may come too late for some companies, particularly those with employees making well below the new threshold ($47,892), who have informed such employees they would be switched to “non-exempt” hourly status and which might face employee relations concerns if they rescind their decisions made in preparation of the new rule. During the recent ISRI Fall Board and Governance meetings in Salt Lake City, some members attending the Legal Counsel discussion on wage and hour laws expressed that their employees are not happy with the reclassification or the “automatic” salary updating mechanism set forth in the rule. Now that the rule won’t take effect December 1, it may be that employers could return employees to their previous status (exempted or non-exempted) or keep the updated status made in preparation of the new rule. Whatever your decision may be, ISRI cautions members on how they move forward and strongly urges them to seek legal advice on how to proceed at this time because the court injunction is temporary and the legal process will very likely continue. The Department of Labor under the Obama Administration is expected to appeal the injunction, although an appeals court is unlikely to have time rule on the matter before the Trump administration takes over on January 20. At that point, President-elect Donald Trump’s DOL and the Department of Justice could drop their defense of the rule, but that isn’t a foregone conclusion.

Members may contact ISRI for more information on the ruling and updates on the appeal; however, members should contact their own corporate or outside legal counsel for specific legal advice on how to proceed with employee classifications and the applicable wage and hour laws governing their businesses. Contact Danielle Waterfield or Tom Casey for information on the appeal.

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