Just days before the implementation date, a federal judge in Texas put the brakes on the Department of Labor’s (DOL's) new federal overtime rule. The ruling comes in response to an emergency motion for a preliminary injunction filed by twenty-one states in October, claiming that the DOL overstepped its authority by raising the salary threshold too high and providing for automatic adjustments to the threshold every three years. The U.S. Chamber of Commerce and other business groups raised similar objections, and their lawsuit was consolidated with the states’ last month. Employers are now in limbo.
To review, the overtime rule was scheduled to take effect Dec. 1, 2016 and would have raised the salary threshold from $23,660 to $47,476. The rule also provided for triennial adjustments based on the 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census region.
This preliminary injunction isn’t permanent. It preserves the status quo while the court determines the DOL’s authority to make the final rule as well as the final rule’s validity. However, the fact that the judge issued the nationwide preliminary injunction may be an indication that the new overtime regulation is in trouble (he wouldn’t have issued it if he didn’t think the states showed a substantial likelihood of succeeding on their claims).
The Department of Labor will very likely challenge this decision. In a statement released following the injunction, DOL claimed it strongly disagreed with the decision and is currently considering all of its legal options. If DOL is successful in its appeal, the preliminary injunction could be revoked in the upcoming weeks or months.
How to proceed
Just sit tight for the moment.
Until a final decision is reached, employers may continue to follow the existing overtime rule. Current requirements under the Fair Labor Standards Act and state/local employment regulations are not impacted by the preliminary injunction, and nonprofits must continue to classify employees based on their performed duties.
If you are one of the many employers that have already raised exempt employees’ salaries to meet the new threshold, you’ll likely want to leave that decision in place. It would be extremely unpleasant to take money back from your employees (and the regulation may be reinstated anyway). But hold off on making other changes like reclassifying employees until the litigation has been settled.