The Overtime Rule Has Been Blocked. Now What?

A federal judge in Texas has blocked the Department of Labor's (DOL's) new federal overtime rule, which would have raised the Fair Labor Standards Act's (FLSA's) salary threshold for exemption from overtime pay from $23,660 to $47,476.

Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas granted a preliminary injunction on Nov. 22 in a lawsuit challenging the DOL's authority to raise the salary threshold. For now, businesses and employees are in a holding pattern.

"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," Mazzant said.

What does this mean for employers? Here are some questions HR professionals may be grappling with in the aftermath.

Does my company still have to do anything by the Dec. 1 deadline? 

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. 

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

No. The overtime rule could still be implemented later down the road. 

A preliminary injunction isn't permanent, as it simply preserves the existing overtime 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: The judge wouldn't have granted the preliminary injunction unless, among other things, he thought the challenge had a substantial likelihood of succeeding. 

Can the Labor Department challenge the decision?

Yes. The department said in a statement that it is currently considering all of its legal options. 

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," the DOL said. 

Does this ruling apply to all employers nationwide?

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," he said.

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?

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, said Alfred Robinson Jr., an attorney with Ogletree Deakins in Washington, D.C., and a former acting administrator of the DOL's Wage and Hour Division. It would be difficult to take that back. 

If there are exempt employees who were going to be reclassified to nonexempt, but haven't been reclassified yet, Robinson said employers may want to postpone those decisions and give the litigation a chance to play out.

"This should be a welcome sign for employers, even if they've already made changes," Robinson said. "They can at least hold off on further changes."

Employers shouldn't assume, however, that the overtime rule will be permanently barred. They should still have a plan to move forward if necessary in the future.

By Lisa Nagele-Piazza for the Society for Human Resource Management

Published: 11/23/2016

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