Tuesday afternoon, a federal judge for the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction on the Department of Labor’s new overtime rules, which were slated to go into effect in just over a week on December 1, 2016. The judge ruled that the Department of Labor (DOL) likely overstepped its rulemaking authority by raising the salary threshold as high as it did and by implementing the automatic increase every three years.

Under the Fair Labor Standards Act (FLSA), the DOL regulation would change the salary threshold for receiving mandatory overtime pay from $23,660 to $47,476 per year, or from $455 to $913 per week. This rule was to impact approximately 4.2 million workers, and had received strong criticism from many different business groups.

What this means now:

  1. The effective date of the rules has been delayed indefinitely. 
  2. Employers may choose not to implement the changes they had planned for Dec. 1 compliance.
  3. The new rules have not been thrown out or invalidated – at least not yet.

The judge has not made a final ruling in the case, but the fact that he issued the injunction suggests that he is leaning in favor of the groups that want to stop the rule changes. It is also possible that his final decision will allow some parts of the rule to stand but not others. The DOL has indicated that in the meantime they are considering their legal options with respect to the preliminary injunction.

Employers are obviously wondering whether they should move forward with the changes they have been planning. Unfortunately, this is a difficult question to answer and ultimately a business decision, which is much harder than a compliance decision. Although employers are not required to make changes, they may want to consider the following:

 

  • Will it hurt the bottom line to make the changes? If so, how much?
  • Will it be difficult to undo changes that have already been made?
  • How will employees feel about the decision? Did they like the changes? Hate the changes?
  • Is the new pay structure better than what is in place now?
  • If the changes aren’t implemented now, will it be possible to make them on short notice in the future?

In many situations, Bene-Care would advise employers to continue to move forward with salary increases that had already been rolled out to exempt employees in order for them to remain exempt under the new rule. If you have employees that were reclassified as non-exempt due to the regulation, you would not be required to pay them OT effective 12/1, but a best practice would be to continue with time tracking and recording of overtime worked in the event that additional wages are due to those employees in the future.

At this point, we do not know how long the injunction will be in place or if the rules will be thrown out entirely. We will be keeping an extremely close eye on this case and will issue further details when actionable information is made available.

For additional infomration on HR and Compliance services offered by Bene-Care, please contact us!