On November 22, 2016, a federal judge in Texas effectively blocked the U.S. Department of Labor from implementing its long-awaited overtime rules. Employers across the country who had been planning for the new rules to go into effect December 1st now find themselves maintaining the status quo, unsure of when the rules will (if ever) be enacted.
Just days before Thanksgiving, a federal judge in Texas entered a nationwide injunction blocking the U.S. Department of Labor (“DOL”) from implementing its long-awaited overtime exemption rules. The rules, originally scheduled to go into effect December 1, 2016, set new salary minimums for exemption from overtime requirements that are nearly double the current limits as required by the federal Fair Labor Standards Act (FLSA).
These new rules were published months ago, and had been on the radar for many public and private employers. However, with the Texas injunction impacting employers across the country, and a new administration set to take office in January, employers are now left wondering what will happen to the rules they had spent months preparing for.
The DOL’s new overtime rules have been a source of contention from the very beginning. In addition to private employers, state and local governments have been vocal in expressing how the new rules would dramatically increase employment costs. Twenty-one states had filed an emergency motion in October of 2016, asking that the rule be halted claiming that the DOL had exceeded its authority.
Judge Amos Mazzant from the U.S. District Court of Texas agreed with the merits of the argument, writing of his desire to preserve “the status quo while the court determines the [DOL’s] authority to make the final rule as well as the rule’s validity.”
Employers now enter a holding pattern while the preliminary injunction remains in effect. The new rules could still be implemented later down the road, and employers will likely want to leave any payroll decisions that they have made to comply with the new rules in place. However, given the fact that the Executive and Legislative branches will be under new management in January, 2017, only time will tell if these new federal rules will ever go into effect.
For its part, the DOL is reviewing all its options. “We strongly disagree with the decision by the court, which has the effect of delaying a fair day’s pay for a long day’s work for millions of hardworking Americans,” the agency said in a statement.
As usual, California will chart its own course on the exemption issue in the following year. Effective January 1, 2017, California’s minimum wage will increase to $10.50 an hour for employers with 26 or more employees. California’s salary basis test for exempt employees is tied directly to the state’s minimum wage and exempt employees must earn at least twice the state’s minimum wage for full-time employment. This means that for some employees of larger employers, exempt employees must earn an annual salary of $43,680 ($10.50 per hour x 2 x 40 hours per week x 52 weeks per year). This change would have been rendered moot by the new federal overtime rules, which set a higher salary. California employers, however, now need to follow the state salary test for the exemptions.
Klinedinst will keep you posted on future developments. Be sure to register for Employment Law Updates to ensure you stay ahead as this story unfolds.
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