New overtime rule put on hold

Monday, November 28, 2016 5:42PM

On Nov. 22, a federal judge in Texas issued a nationwide preliminary injunction delaying the implementation of the Department of Labor’s new overtime regulation, which had been scheduled to take effect on Dec. 1. The now-delayed rule made most employees earning less than $913 per week ($47,476 annually) eligible for overtime pay whenever they worked more than 40 hours per week.

The newly issued preliminary injunction is a purely temporary measure maintaining the status quo until the judge can issue a permanent ruling on whether the Department of Labor overstepped its authority in issuing the overtime regulation.

Furthermore, it is likely that the DOL will swiftly appeal this preliminary injunction.

That being said, the preliminary injunction not only delays the Dec. 1 implementation date, but also calls into question whether the overtime rule will ever take effect in its current form. To the extent that the issue has not been resolved by the time Donald Trump takes office on Jan. 20, then there is a possibility that the new presidential administration will refuse to defend the regulation in court or will otherwise negotiate with Congress to formulate a compromise.

Employers trying to navigate through this uncertain situation should take the following factors into consideration:

Employers that have already announced or implemented pay changes for their employees will need to carefully consider the potential impact on morale before deciding whether to reverse or delay implementing pre-announced changes. Any changes to pay or pay plans should be announced in writing to employees before taking effect, even in situations where an employer merely intends to “put on hold” a previously announced pay change that had not yet taken effect.

Employers that have not yet announced pay changes can more easily take a “wait and see” approach, but need to keep in mind that the new overtime regulation could come swiftly into force if the preliminary injunction is reversed or lifted in the future. Accordingly, employers can maximize their protections by having the plans and paperwork in place to “hit the ground running” if the regulation is allowed to take effect down the road.

This preliminary injunction has no effect on the existing “job duties” exemption tests that most salaried employees must pass under existing law in order to be exempt from obligatory overtime pay requirements. Accordingly, employers are well advised to continue the process of analyzing their salaried positions to ensure that they pass one of the exemption tests. Employers can often bolster their position that a job passes one of the “job duty” exemption tests by properly structuring job duties, job descriptions, organizational charts, and other employment-related documentation to support the exempt status of salaried employees. Conversely, employers that fear certain positions may not meet the applicable duties tests may still want to proceed with implementing alternative pay methods for these roles, including fluctuating workweek pay systems.

Unfortunately, it appears likely that employers will face continued uncertainty concerning pay rules for a number of weeks or months. Accordingly, employers are well-advised to ensure that they are compliant with already existing overtime rules and are likewise prepared to act quickly once there is more clarity concerning the fate of the Department of Labor’s new overtime regulation.

Ben Wyatt is managing partner of the Law Offices of Wyatt & Associates, PLLC, a Keene law firm focused on labor and employment law. To contact him, visit www.wyattlegalservices.com.