Federal Judge Halts Overtime Rule
Until a final decision is reached, employers may continue to follow the existing overtime rule
By Lisa Nagele-Piazza, SHRM-SCP, J.D.
Nov 22, 2016
Just 10 days before the implementation date, a federal
judge in Texas put the brakes on the Department of Laborfs (DOL's) new
federal
overtime rule, which would have doubled the Fair Labor Standards Actfs
(FLSAfs) salary threshold for exemption from overtime pay.
Twenty-one states filed an emergency motion for a
preliminary injunction in October to halt the rule. They claimed that the DOL
exceeded its authority by raising the salary threshold too high and by providing
for automatic adjustments to the threshold every three years.
The statesf case was consolidated
last month with another lawsuit filed by the U.S. Chamber of Commerce and
other business groups, which raised similar objections to the rule.
The overtime rule was scheduled to take effect Dec. 1
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.
gA preliminary injunction preserves the status quo
while the court determines the departmentfs authority to make the final rule as
well as the final rulefs validity,h said Judge Amos Mazzant of the U.S. District
Court for the Eastern District of Texas in a Nov. 22 ruling.
gThis is a total surprise in many respects, but you
have to tip your hat to the judge who made a tough call and hopefully a decision
that will stay in place,h said Alfred Robinson Jr., an attorney with Ogletree
Deakins in Washington, D.C., and a former acting administrator of the
DOL's Wage and Hour Division.
The Society for Human Resource Management's (SHRM's) "members and Advocacy
Team played a key role in highlighting the difficulties of the rule and raising
awareness of its negative impacts on the workplace including its impact on
workplace flexibility and employee morale," noted Nancy Hammer, senior
government affairs policy counsel for SHRM.
"The court's decision is welcome news for SHRM members and employers who have
been struggling with the impacts of the rule—especially nonprofits and smaller
organizations," she said.
Whatfs Next?
For now, the overtime rule will not take effect as
planned Dec. 1, but it could still be implemented later down the road. Employers
may continue to follow the existing overtime regulations until a decision is
reached.
A preliminary injunction isnft permanent, as it simply
preserves the existing overtime rule—which was last updated in 2004—until the
court has a chance to review the merits of the case objecting to the revisions
to the regulation.
However, the revised regulation may face an uphill
battle: The judge wouldnft have granted the nationwide preliminary
injunction unless, among other things, he thought the states showed a
substantial likelihood of succeeding on their claims.
The purpose of the FLSAfs provisions under review in
this case gwas to exempt from overtime those engaged in executive,
administrative and professional capacity duties,h Mazzant said. The salary level
was purposefully set low to screen out the obviously nonexempt employees, he
added.
Mazzant noted that the DOL ghas admitted that it
cannot create an evaluation ebased on salary alone.f h However, gthis
significant increase to the salary level creates essentially a de facto
salary-only test,h he said. gIf Congress intended the salary requirement to
supplant the duties test, then Congress—and not the department—should make that
change.h
Robinson mentioned that the DOL will likely challenge
the decision.
gWe strongly disagree with the decision by the court,
which has the effect of delaying a fair dayfs pay for a long dayfs work for
millions of hardworking Americans," the DOL said in a statement. "The
departmentfs overtime rule is the result of a comprehensive, inclusive
rulemaking process, and we remain confident in the legality of all aspects of
the rule. We are currently considering all of our legal options.h
HRfs Role
Many employers have already either raised exempt
employeesf salaries to meet the new threshold or reclassified employees who are
still earning less to nonexempt status.
Employers will likely want to leave decisions in place
if they have already provided salary increases to employees in order to maintain
their exempt status, Robinson said. It would be difficult to take that back.
If there are exempt employees who were going to be
reclassified to nonexempt, but havenft been reclassified yet, Robinson said
employers may want to postpone those decisions and give the litigation a chance
to play out.
gThis should be a welcome sign for employers, even if
theyfve already made changes,h he said. gThey can at least hold off on further
changes.h
Employers shouldnft assume, however, that the overtime
rule will be permanently barred. They should still have a plan to move forward
if necessary in the future.
In the meantime, HR professionals will have to
consider what
to do now.