Judge Blocks New Overtime Rule
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On Tuesday a federal judge in Texas issued a nationwide injunction blocking the implementation of the DOL’s new overtime rule, set to take effect on December 1st.
By way of background, this Rule would have raised the minimum salary requirement for exempt employees from $23,660 to $47,476 – employees below this new salary level would have automatically become entitled to overtime pay at a rate of 1.5 times their (effective) hourly rate for all hours over 40 in a workweek. For now, this will not happen.
So now what? First, the ruling casts significant doubt on whether this Rule will ever go into effect, even in modified form. As a legal matter, the standard for granting an injunction is very high, meaning the judge must have had very strong legal grounds to find the Rule was unlawful. While an injunction is only a temporary measure prior to a full hearing (or trial), the judge’s somewhat scathing opinion does not mince words – he unequivocally states that the DOL had no authority to raise the salary level. In other words, there is no indication that his ruling will change, even after a full hearing.
There have also been discussions in the US Congress to push through a law which would have modified this new Rule, by way of a compromised higher salary level (say halfway between $23,660 to $47,476). But with the Rule now blocked, and with its legal life seriously in doubt, there are some indications that the sponsors of this compromise bill, well, no longer have a reason to compromise.
So will the salary level stay at $23,660? For now, yes. But in the next 6-9 months (but who really knows when), it will likely be raised, a little. Even opponents of the Rule agree that there needs to be some upward adjustment (though only up to the low $30,000s, if that).
Of course, the practical side of this is where it counts most: all of this throws companies’ plans into disarray. Some companies have been scurrying to get their plans and messaging together, and had everything lined up and ready to go on December 1st.
But worse off are companies which have already implemented the necessary changes, including raising people’s salaries to keep them exempt, while converting others, requiring them to keep time records and in many cases have reduced their hours to avoid paying overtime. How do you roll back these complex organizational changes? Do you even? Particularly since in many cases these rollbacks may involve reducing people’s salary. Great questions with very difficult answers. On the other hand, for some companies this may be the best news they will get all year.
Suffice to say, if you have been paying attention to the news surrounding this Rule for the past year, plus, you know it has been a wild ride. The wild ride continues.
The good news – we will keep you updated on all pertinent developments, and as always, we are here to help you in any way we can. Let us know how.
Michael W. Kulakowski, Esquire
Employment Counsel/Director, Compliance Services
MidAtlantic Employers’ Association
*This MEA Member Alert is provided for general informational purposes only and does not constitute legal advice.