United States

Federal judge temporarily halts the overtime rule

INSIGHT ARTICLE  | 

On Nov. 22, 2016 Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas granted a preliminary injunction in a lawsuit challenging the Department of Labor’s (DOL's) authority to raise the salary threshold for overtime pay. This decision came only 10 days before the intended implementation date of Dec. 1. The DOL's new federal overtime rule would have raised the salary threshold for exemption from overtime pay as determined by the Fair Labor Standards Act (FLSA) from $23,660 to $47,476.

For now, businesses and employees are in a holding pattern. As Mazzant noted, "A preliminary injunction preserves the status quo while the court determines the department's authority to make the final rule as well as the final rule's validity."

What does this mean for employers? Until a final decision is reached, organizations may follow the existing rule. In addition, following are some questions many businesses are grappling with in the aftermath.

Q.  Does my company still have to take any action by the Dec. 1 deadline?

A.  The short answer is no. For now, the overtime rule will not take effect as planned on Dec. 1, so employers may continue to follow the existing overtime regulations.

Q.  Is this a final decision that permanently puts an end to the rule?

A.   No. The overtime rule could still be implemented later down the road. A preliminary injunction isn't permanent; it simply preserves the existing rule—which was last updated in 2004—until the court has a chance to review the merits of the case objecting to the revisions to the regulation. However, the revised regulation may face an uphill battle: It is speculated that the judge wouldn't have granted the preliminary injunction unless, among other things, he thought the challenge had a substantial likelihood of succeeding.

Q.  Can the DOL challenge the decision?

A.   Yes. The DOL said in a statement that it is currently considering all of its legal options. The DOL responded to the injunction, stating the "overtime rule is the result of a comprehensive, inclusive rulemaking process, and we remain confident in the legality of all aspects of the rule."

Q.  Does this ruling apply to all employers nationwide?

A.   Yes. Because the overtime rule would apply to all states, the judge decided to apply the injunction nationwide. "A nationwide injunction protects both employees and employers from being subject to different [executive, administrative and professional] exemptions based on location," Judge Mazzant said.

Q.  What should I do if my company has already either raised exempt employees' salaries to meet the new threshold or reclassified employees to nonexempt status?

A.   Employers will likely want to leave decisions in place if they have already provided salary increases to employees in order to maintain their exempt status. This type of action would be difficult to reverse.

If exempt employees were scheduled to be reclassified to nonexempt, but haven't been reclassified yet, employers may choose to postpone those decisions and give the litigation a chance to play out.

While the injunction has been granted, employers shouldn't assume that the overtime rule will be permanently barred. With the DOL planning to challenge the decision, employers should continue following the existing rule, but also understand the proposed guidelines and have a plan to move forward if necessary in the future.

AUTHORS


Consumer Products Insights

( * = Required fields)

Related

Consumer Products Insights
News, trends and insights for the consumer products industry.

Events and Webcasts

Case Studies