Federal Court Halts Overtime Rule, What’s Next?
Uncertainty of Overtime Rule Could Change Plans
A federal court issued a preliminary injunction halting the overtime rule on November 22. The rule would have increased the salary exemption level to $47,476 on December 1, and many organizations have already spent time (and budget) preparing for the new rule. What was the basis of the court order, and what should you expect from this rule moving forward?
Lawsuits Allege the Government Overstepped Its Authority
Two separate lawsuits were filed by nearly two dozen states and a coalition of business groups alleging that the Department of Labor (DOL) had overstepped its authority with the $47,476 salary threshold. These complaints were consolidated into a single case presided over by Judge Amos Mazzant in Texas.
Judge Mazzant ruled in favor of the challengers seeking a preliminary injunction to halt the rule from going into effect on December 1. The court states that the Fair Labor Standards Act (FLSA) delegated authority to the DOL to establish the types of duties that qualify for these exemptions, but not to disqualify employees based on salary levels. In the order, Mazzant writes that in setting the automatic salary increases, “the department exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test.”
What Should I Do About Salary Exemptions Now?
With this injunction in place and the upcoming Presidential transition, the overtime rule is increasingly uncertain. Your next steps will depend on what steps you had already taken to prepare for the new rule.
If you haven’t talked to employees…
The duties tests have not changed under the new rule. If anything, the court reinforced the authority of the DOL to administer the duties test for white collar exemptions. If you have employees that do not meet the duties test for exemption, you should reclassify them as non-exempt.
On the other hand, if you have employees who clearly meet the duties test, you may hold off on making salary changes or reclassifications. Given the rule’s uncertain status, you may not have to implement these changes at all.
If you’ve already talked to employees…
If you have already told exempt employees that they will be receiving a raise to the new salary level, consider going through with the increase. Going back on these increases could lower morale and leave you open to potential lawsuits for failing to follow-through with a promised salary increase.
If you have already told previously exempt employees that they will soon be treated as non-exempt and entitled to overtime pay, determine how they will react to revoking that change. If those employees value the flexibility of being exempt, despite the lack of overtime pay, you may decide to return them to exempt status (assuming they qualify). If employees will react negatively, however, seeing the potential for overtime as a raise, you can still go through with reclassifying them as non-exempt.
Ultimately, there is no perfect solution that works for every employer. You’ll want to consider which option or options work best to keep you in compliance with the existing regulations and cause the least amount of disruption. You’ll want to talk to your legal advisors as well, before you make the change.
If you need any updates to your time and attendance software, depending on what you decide, contact us!