A federal judge in Texas has temporarily blocked the Department of Labor’s new white-collar overtime rules from taking effect on Dec. 1. A preliminary injunction issued Nov. 22 means employers only have to pay overtime to exempt workers who make less than $23,660 annually—not $47,476, the salary threshold set out in final rules issued in May.
Think you know the law? Think again. The feds revamped the overtime rules several years ago, supposedly to make things simpler. But wouldn’t you know, things only got more complicated. Make sure you’re in compliance.
U.S. District Judge Amos Mazzant’s ruling for now denies overtime pay to an estimated 4.2 million additional workers. It throws into confusion HR and payroll plans to implement the new rules in just a few days.
Employers should proceed with caution, advises Steve Pockrass, who chairs the wage-and-hour practice at the Ogletree Deakins law firm. Since there is no guarantee the new OT rules are gone forever, continue planning for eventual implementation.
Pockrass says employers “that already have made changes will need to decide whether it makes business sense to suspend, alter or reverse those changes pending any subsequent legal developments.”
Thousands of employers have spent recent months raising white-collar workers’ pay, changing exempt/nonexempt classifications, rewriting job descriptions and altering schedules and reporting relationships to adjust to the new salary threshold.
Many of those changes will be difficult to undo, and smart employers are taking a wait-and-see approach. Reversing course too soon could badly damage employee morale.
Mazzant’s order, although temporary, signals that he believes 21 state attorneys general and a coalition of business groups that sued to stop the overtime rules have a strong case. “The State Plaintiffs have shown a likelihood of success on the merits because the Final Rule exceeds the Department’s authority,” Mazzant wrote.
Welcome to the game of “exempt or nonexempt,” with rules set by the Fair Labor Standards Act. Only it’s not a game. The rules are incredibly complex and open to interpretation — so much so that an estimated 40% of employers unknowingly violate the law. The stakes are enormous, with potentially huge legal fees and judgments against your company.
The lawsuit, filed in the U.S. District Court for the Eastern District of Texas, argues that the Fair Labor Standards Act does not allow the DOL to rely solely on the salary threshold to decide who is eligible for overtime pay. The suit contends any overtime pay revision must also address the duties test that defines who qualifies for the FLSA’s executive, administrative and professional exemptions.
Mazzant wrote that the new overtime rules’ “significant increase to the salary level creates essentially a de facto salary-only test.” The new rules explicitly left the duties test unchanged.
What to tell employees
Employees who were in line to become eligible for overtime pay will no doubt be disappointed by this news. The Seyfarth Shaw employment law firm urges employers to communicate honestly and openly with those employees while they decide what to do next.
The firm’s website offered this sample language:
“A federal court in Texas has issued an order that makes it uncertain how the FLSA’s overtime pay exemptions apply to employees who would be impacted by the new rules that were to go into effect on December 1. Because of the court’s order, those rules will not go into effect as expected. To ensure that it is able to follow the laws that govern how employees are paid under the FLSA, the company has revised its plans and will be reporting back to you soon about how this will impact you.”
If you have any additional questions, please contact CyQuest to get further guidance.