Overtime rules scheduled for Dec. 1 suspended
Human Resource directors everywhere were braced for a major change in overtime rules that would have affected millions of workers nationwide by increasing the pay threshold to qualify for overtime from $23,660 to $47,476. The change was scheduled to go in effect on December 1, but in an eleventh hour reprieve for employers, a federal judge in Texas issued a nationwide injunction.
The legal challenge was brought by 21 states and multiple business groups.
According to Laurel Brubaker Calkins of Insurance Journal :
U.S. District Judge Amos L. Mazzant III in Sherman, Texas, rejected a request by the federal government to limit any order to the states that filed the lawsuit and issued a preliminary injunction blocking the new salary cutoff nationwide.
By requiring employers to pay overtime wages based on salary rather than an employee’s duties, the Labor Department exceeded its authority under the Fair Labor Standards Act and ignored Congress’s intent, Mazzant said in his ruling. “If Congress intended the salary requirement to supplant the duties test, then Congress and not the department, should make that change,” he said.
The New York Times coverage (Judge Suspends Rule Expanding Overtime for Millions of Workers) includes a copy of the ruling and Noam Scheiber discusses the future of the ruling since this is a temporary injunction. Even if there is a legal challenge to the injunction, it is expected that a Trump administration would reverse the regulation, which had been initiated by executive order. But Scheiber reports:
Still, because undoing the regulation could have required a months- or years-long rule-making process similar to the one that produced it, the new overtime limit appeared likely to survive in some form. Some business lobbyists had anticipated a legislative compromise that phased in the new limit over a longer period of time and eliminated an automatic increase in the limit every three years.
The injunction would appear to make such a reprieve far less likely, although the question remains whether the Trump administration will seek a legislative deal that would raise the salary limit above the $23,660 that has prevailed since 2004, but below the Obama administration’s preferred level.
He quotes one of the parties to the suit as noting that opponents might be open to some change in the current threshold since it has been 12 years since the last time it was increased.
What's the next step for employers?
Although most employers are likely to be relieved about this halt, it also creates a dilemma and confusion. First, this is a temporary injunction that could be appealed. Second, with the deadline right around the corner, many employers had already implemented the changes. Now what -- continue on or undo the changes?
Bloomberg's Daily Labor Report discusses the dilemma in its article Employers Wrestle with Whether to Cancel Overtime Rule Plans. The article discusses preliminary employer responses.
Michael Haberman is a Human Resources known as "the compliance guy" who posts about HR issues at a blog at Omega HR Solutions. He has a helpful post offering guidance to HR managers: The FLSA changes have been stopped, NOW WHAT?
He offers suggestions for employers that
- Have not made any changes yet
- Just Made changes this past week
- Made the change months ago
Here’s how some local employers are reacting:
More on the overtime issue
Judy Greenwald of Business Insurance: Labor Department mulls legal options after overtime ruling
Amanda Eisenberg, EBN: Should employers continue to prepare for overtime regulations?
See our May blog post that explained the changes: What insurance agents need to know about DOL’s proposed overtime rules