|Last week, a Texas federal district court placed a temporary nationwide injunction blocking implementation of the Department of Labor’s (DOL) new overtime rule scheduled to go into effect on Dec. 1.
Responding to lawsuits filed by twenty one states and a coalition of business groups, the court found that Congress intended for exempt status to be based on an employee’s actual duties rather than the employee’s salary, and therefore, DOL exceeded its authority by issuing a rule based on a “de facto salary-only test.”
We asked Mary McClatchey, President of WorkSmart Partners, to review and comment on the court’s decision. Mary delivered several training’s to Colorado nonprofits this year about the rule change:
What Should You Do Now?
- For now, employers are not required to implement changes by Dec. 1 based on the new overtime regulations.
- Effective Jan. 1, 2017, employers are required to pay $9.30 an hour or more to comply with Amendment 70.
- Employers still contemplating changes to adhere to the new rule should consider waiting to see what happens before taking action.
- Employers who announced or implemented changes must decide if they will proceed with them or roll them back, whether this decision is made now or after the dust clears.
- For changes based on this ruling, employers should notify employees that a federal court halted implementation of the rule. More changes may follow from the courts or actions by the new administration or Congress.
Employers should handle their communications with employees with care particularly if their decisions rescind pay increases or affect other favorable changes for employees.
Because each workplace is unique, employers should consider which approach causes the least disruption and adverse impact on their workplaces.
What Can We Anticipate Next?
The preliminary injunction is likely to become permanent. The DOL is likely to appeal to the Fifth Circuit U.S. Court of Appeals which has a business-friendly reputation.
The prior overtime rules remain in effect including the duties test for exempt employees, the existing minimum salary for exempt positions ($455/week or $23,600/year), and no automatic increase in the salary threshold.
The timing of any future changes to the rules is completely up in the air. The new administration could end the rule-making permanently or issue a new amended rule with a different salary threshold. The Trump campaign platform called for a small business exemption.
Congress could vote to block the new rules under the Congressional Review Act or enact legislation to remove the salary increase or phase it in over several years.
The bottom line is no one knows what will happen next legally or politically.