Employment Law Alert

Federal Judge Temporarily Blocks New Overtime Rule From Taking Effect On December 1

November 23, 2016

On November 22, a federal judge in Texas issued a preliminary order that temporarily blocks the U.S. Department of Labor (DOL) from implementing changes to the salary basis for white collar overtime exemptions.  The new salary rule, which was to become effective on December 1, 2016 would have required employers to increase exempt employees’ minimum salary from $23,660 to $47,476.  The preliminary court order blocking the rule appears to apply to all public and private employers nationwide.

The order was granted on a preliminary basis because the plaintiffs in the case, a group of 21 states and business groups, demonstrated to the judge that they had a likelihood of ultimately succeeding in the case and that they would be irreparably harmed if the rule went into effect as planned.  In the case, the plaintiffs are seeking a judgment that the DOL’s rule was unlawfully promulgated.      

This surprising development creates uncertainty for employers and raises important questions about how to proceed.  Some employers have already implemented changes to comply with the new rule, or made plans to do so by December 1, and communicated those plans to employees.  Although the temporary injunction may be seen by employers as very positive, it is also not the final word.  The DOL may appeal the order. 

As this situation plays out in the courts, employers must decide what to do in the meantime.  Employers that have not implemented changes should consider postponing them.  Because many employees may already be aware of the planned changes, employers should clearly communicate with employees that the postponement is the result of a court’s order and that the employer will decide how to proceed once a final judgment is issued by the courts.  Employers who have already implemented changes, reclassified employees as non-exempt, or increased employees’ salary to comply with the DOL’s rule, must consider the potential impact on employee relations and payroll and HR administration from abruptly cancelling those changes.

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