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DOL Overtime Rule Blocked in Federal Court

On November 22, Federal Judge Amos L Mazzant III allowed a preliminary injunction motion seeking to stop the revised regulations from taking effect nationwide on December 1, 2016. The Department of Labor’s (DOL’s) new federal overtime rule would have doubled the Fair Labor Standard Act’s (FLSA’s) salary threshold for exemption from overtime pay. In October, 21 states and various chambers of commerce and business groups filed separate suits in opposition of the changes, claiming the DOL surpassed its authority by raising the salary threshold too high. Judge Mazzant heard arguments from both sides, and issued the court’s ruling to stop the revised rules from taking effect.

For now, the rules are temporarily on hold until the judge decides to grant a permanent injunction or grant the states motion for summary judgement. This preliminary injunction is not yet permanent and simply preserves the existing 2004 overtime rule. It may be still implemented down the road. Many employers have already raised exempt employees’ salaries or reclassified employees who did not meet the minimum salary requirement. Employers have a choice to make as to whether they go forward with the changes already in the works, or to put them on hold pending the final outcome of the litigation.

Some congressional alternatives to the DOL rule are currently being reviewed with the halt of the previous changes.

  • The Regulatory Relief for Small Businesses, Schools, and Nonprofits Act proposes delaying the effective date of the overtime rule by six months, from December 1, 2016 to June 1, 2017.
  • The Overtime Reform and Enhancement Act was introduced to the House in July and has more limited aims. The overtime rule would be phased in over four years and eliminate the automatic triennial inflation-based increase of the exempt salary threshold. Instead of raising the exempt salary threshold to $47,476, this bill would raise the new threshold this December from $23,660 to $35,984. It then would raise the threshold to $39,814 on Dec. 1, 2017; $43,645 on Dec. 1, 2018; and $47,476 on Dec. 1, 2019.
  • The Overtime Reform and Review Act was introduced in September and would provide the same step increases as the Overtime Reform and Enhancement Act, but at a slower pace and with no increase in 2017: $35,984 on Dec. 1, 2016; $39,814 on Dec. 1, 2018; $43,645 on Dec. 1, 2019, and $47,476 on Dec. 1, 2020.

If the DOL’s overtime rule continues to remain blocked, the new administration could introduce its own overtime rule for employers. There is also a slight possibility that a new ruling could be retroactive to the original effective date of Dec. 1, 2016. This could cause an issue if an exempt employee is determined to be non-exempt by a new rule and their time has not been tracked. Employers may want to consider using a time clock or time sheet for all employees to ensure hours worked are paid correctly in the future if retroactive pay is needed.

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