In our June newsletter, David Smith, President and CEO of EASI•Consult®, provided an overview of the final U.S. Department of Labor (DOL) regulation dealing with overtime rules scheduled to go into effect on Dec. 1.
The new regulation would have increased the annual salary threshold that generally determines who qualifies for overtime pay from $23,660 to $47,476 – more than a 100 percent increase and a change that would impact around five million people. Overtime pay is designated as time-and-a-half for any hours beyond the 40-hour work week.
Many employers were worried these new overtime rules would force them to cut workers’ hours, slow hiring of full-time employees and shift workers from salaries to hourly wages.
Was all that worry for nothing? We’ll have to wait and see.
On Nov. 22, U.S. District Judge Amos Mazzant out of Texas entered a nationwide injunction – in response to a complaint filed by 21 states – to block the DOL from enforcing its new rule. Mazzant held that the new rule effectively creates an unlawful salary test for determining which workers qualified under the professional, executive or administrative exemptions – commonly known as the white collar exemptions – of the Fair Labor Standards Act (FLSA).
While this no longer presents a need to comply with the new rules by Dec. 1, it still leaves the future unclear, says Smith, since the court merely granted a temporary injunction. According to Husch Blackwell’s Labor and Employment Group, the temporary injunction is important for two reasons: “First, while it is not permanent at this point, it sheds light on what the court may decide regarding whether to permanently invalidate the rule. Second, because this is a preliminary injunction, it can be appealed immediately.” The next step is the Fifth Circuit Appeals Court. While the Fifth Circuit tends to lean in the favor of the lower courts, no one knows what the outcome will be or how soon this will be brought up again.
So, what should you do as an employer?
Given the last-minute decision by the court – made less than two weeks before the anticipated overtime changes – many employees may have already planned for the new rule to take effect and communicated the impact to their employees. For those who have not, you will probably want to hold off until the courts play out the final decision.
The bigger decision is what to do about those cases in which employees have already been reclassified and the information has been disseminated. Employers will likely want to leave those decisions in place in cases where employees have been promised an increase in compensation. It would be difficult to take that back without having a negative impact on the morale of employees.
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