Wednesday, November 23, 2016

DOL Overtime Rule Put on Hold

Late yesterday, a federal district judge in the Eastern District of Texas issued a nationwide injunction against the new Department of Labor overtime rules set to go into effect on December 1st.  In a ruling that surely came as a surprise to employers and employment experts alike, the judge found that the new salary level is unlawful as is the automatic adjustments to the minimum salary level for white collar exemptions set to take place beginning in 2020.

Employers across the nation have spent the last several months preparing for the changes that were expected to go into effect next week.  The timing of the court ruling may leave many employers in a quandary regarding their implementation plans, but the scrutiny of the new rule is not over yet.  Undoubtedly the Department will appeal the decision and the 5th Circuit Court of Appeals has the option of dissolving the injunction, which could happen fairly quickly, putting employers back to the spot that they were in before the court decision yesterday.  Regardless of who prevails in that appeal, the underlying issues will probably be subject to further review.

The immediate problem for employers is what to do about their planned changes.  The best course of action seems to be to maintain the status quo in the workplace.  For employers who have already implemented changes, it may be too early and too disruptive to staff to reverse those changes at this point.  Conversely, those employers who were waiting for December 1st to implement their changes, or were planning an implementation date of November 28th, being the start of the week in which December 1st falls, can take this opportunity to delay those changes pending further court review.
Affected employees generally fall into three categories, requiring employers to undergo decisions for each, as follows:
  • Employees being reclassified from exempt to non-exempt. This is likeliest the easiest decision for employers. Those employees who were being reclassified from exempt to non-exempt should experience minimal change as a result of a delay in implementation of the new overtime rules. 
  • Employees whose classification or pay has already been changed in anticipation of the new overtime rules. Given the uncertainty of the future of the new overtime rules, it is likely premature to reverse changes already in place affecting employees. A wait-and-see position is probably best. In these cases. 
  • Employees anticipating a wage increase to maintain their exempt status. These employees are clearly the most potentially affected group. In those cases, it is the employer’s decision whether to proceed with the raise anyway, since it is already likely budgeted and promised, or delay it with the explanation that the new overtime rules are on hold.  Since many employers made their decision to maintain exempt status of certain employees based in large part on the amount of the raise needed, it may be better for overall morale to go forward with the increases as planned in most instances since those raises are likely not unmanageably large.
In any event, employers should immediately notify employees of their decision and what to expect (or not expect) as a result. The Workplace Report will keep you updated on further developments.