Late last month a federal judge in Texas issued a nationwide injunction against implementation of the Obama Administration’s new overtime rules under the Fair Labor Standards Act. The new rules were supposed to go into effect on December 1, 2016, and would have resulted in substantially more employees becoming eligible for overtime under the FLSA. Recently the United States Court of Appeals for the Fifth Circuit declined to interfere with the trial court’s injunction.
I previously wrote about the new rules here. The new rules would have raised the salary threshold for the professional, administrative, and executive exemptions from $455 per week to $913 per week ($47,476 annually). The new threshold would have been indexed so that it likely would have gone up every three years. In my prior post, I speculated that the Texas federal judge would not enter an injunction. I got that part wrong.
For six months I have been working with clients to evaluate how best to approach the new overtime rules. The problem was that some positions at some workplaces have been entrenched for years. Some decided to redefine job positions with new responsibilities. Others decided to accept the new rules and prepare for paying employees by the hour who previously were paid a weekly salary. Some were unsure of how to proceed. Even with the injunction in place, there is uncertainty about what will happen next.
The injunction does not invalidate the Obama Administration’s overtime rules. It merely puts a hold on the implementation of the new overtime rules until the court reaches a final decision on the legality of the new rules. The court has requested briefing on the issue and could render a final decision as early as January 2017. If the court concludes that the Obama Administration acted appropriately in formulating the new overtime rules, then the effective date of the new overtime rules could roll back to December 1, 2016. Yikes. This would result in reclassification of employees as exempt or nonexempt, and make the classification retroactive to December 1, 2016. Employees reclassified as nonexempt could be entitled to overtime dating back to December 1, 2016. Double yikes.
And also in January, the new administration takes over and Congress is back in session. With Republicans occupying the White House and having the majority the House of Representatives and the Senate, Congress or the new administration could step in to make changes to the new overtime rules. Given the rhetoric of the election season, I don’t know where the new overtime rules are on the Republicans’ list of things to undo from Obama’s Administration.
So we will watch and see if the Texas federal judge issues a final ruling. Or whether the new administration and Congress steps in to act. Stay tuned…