On Nov. 22, a federal district judge in Texas issued a preliminary injunction blocking implementation of the Overtime Final Rule, ruling that the U.S. Department of Labor exceeded its authority.
Barring a last-minute appeal, the overtime rule will NOT go into effect as scheduled on December 1 because of this decision.
At issue is the question of which employees qualify for an exemption from the requirement under the federal Fair Labor Standards Act (FLSA) that most employees are entitled to time and a half overtime pay for work in excess of 40 hours in a week. The FLSA exempts from the overtime requirement "any employee employed in a bona fide executive, administrative, or professional capacity," often called the EAP or "white collar" employees. Current regulations require that employees must possess the duties of executives, administrative workers, or professionals and be paid more than a minimum salary. The overtime rule published by the Labor Department in May, and set to go into effect on December 1, would have more than
doubled the existing "salary level test" for exempt white collar employees from $455 per week ($23,660 per year) to $913 per week ($47,476 per year).
Twenty-one Governors and Attorneys General filed suit in federal court challenging the overtime rule on several grounds. Siding with the states, Federal Judge Amos Mazzant held that the white collar exemption is clearly based on the duties that individual employees perform, and that the Labor Department did not have the authority to create a different or higher standard. Specifically, he ruled: "Congress gave the Department the authority to define what type of duties qualify [for the overtime exemption] - it did not give the Department the authority to supplant the duties test and establish a salary test that causes bona fide EAP's to suddenly lose their exemption 'irrespective of their job duties and responsibilities.'"
The judge issued a nationwide preliminary injunction. The Department of Labor is expected to appeal the decision, meaning that injunction could be lifted and the overtime rule put in place in a matter of weeks or months.
According to the Hawaii Employers Council, this means that - for the time being - employers are no longer required to comply with the DOL's new rules on December 1, 2016. For instance, any employee who was going to be converted to non-exempt status solely due to the increased salary threshold can now remain exempt.
With regards to employees for whom there was a scheduled salary increase, employees may want to take this opportunity to reconsider the pay hike. Some employers may still decide to implement salary increases that they have prepared for over the past several months - either because they have already announced or enacted such changes - and are free to do so. However, employers who would have faced financial difficulty due to the salary increases can now reconsider whether they will be increasing employees' pay simply for the purpose of keeping the employees exempt.
For more info on this from the National Council of Nonprofits, click here.