New overtime rule on hold

By Larry Ryan, EVP, Commercial Banking

What businesses should do now that the overtime pay rule is on hold.

The implementation of a U.S. Department of Labor (DOL) rule that would have roughly doubled the number of Americans eligible for overtime pay is now on hold. Just before Thanksgiving, Judge Amos L. Mazzant III of the U.S. District Court for the Eastern District of Texas issued a nationwide injunction against the rule, indefinitely pushing back its December 1, 2016 effective date.

The DOL rule, released in May, would have made 4.2 million white-collar workers newly eligible for overtime benefits. It raised the Fair Labor Standards Act’s (FLSA’s) salary threshold from $23,660 to $47,476 for salaried employees to automatically qualify for time-and-a-half overtime pay when working more than 40 hours per week. In October, 21 states challenged the rule in a lawsuit, filing an emergency motion for a preliminary injunction to stop the rule’s implementation. They claimed that the DOL had exceeded its authority by raising the salary threshold so significantly and by providing for automatic adjustments to the threshold every three years. The U.S. Chamber of Commerce and 50 other business groups also raised concerns about the ruling’s implementation and filed another lawsuit, which was consolidated with that of the states.

In suspending implementation of the overtime rule, the judge said that the federal law governing overtime does not allow the DOL to decide which workers are eligible based on salary levels alone. The DOL will likely challenge the judge’s decision, saying that it “remained confident in the legality of all aspects of the rule” and was considering its legal options.

What does this mean for businesses and employees?
With the injunction issued just 10 days before the ruling’s proposed implementation, businesses of every size across the country were already gearing up to comply. But, what should business owners do now?

The Society of Human Resources Management (SHRM) shared the following recommendations for businesses while the overtime rule is being reviewed:

  • Follow existing overtime regulations. The overtime rule will not take effect as planned on December 1, employers may continue to follow the existing overtime regulations
  • The overtime rule is not “dead” yet. The overtime rule could be implemented at a later date. The injunction isn’t permanent; it simply preserves the existing overtime rule until further review by the court
  • The injunction applies to all employers and employees nationwide.

For businesses that took measures to either raise exempt employees’ salaries to meet the new threshold or reclassified employees to non-exempt status, SHRM reported the following suggestions:

  • Retain the salary increases that were provided to employees to maintain their exempt status
  • Postpone new decisions on whether to reclassify exempt employees to non-exempt until the litigation plays out

The bottom line on the new overtime rule
No further changes for overtime compliance need to be done at this time since the injunction is in place. However, since the regulation is not permanently barred, businesses owners should still consider a plan if the salary threshold is modified and the regulation survives in some form in the future. SHRM provides a resources guide about the proposed overtime rule as well as a compliance checklist. Until a final decision is reached businesses, and employees, will have to adopt a wait-and-see attitude about whether the salary threshold that qualifies workers for overtime pay will be raised.