First, it’s important to understand what the new overtime rule proposed to change. There are two ways overtime eligibility is established. To be eligible for overtime, an employee must meet a salary test and a job duties test.
The new rule changed only the salary test, not the job duties test. Under the old parameters, the salary threshold was $23,660 per year. With the New Rule, the threshold would have been raised to $47,476.
The rule also increased the parameters for being considered a high-income earner and thus, be ineligible for overtime. It was estimated that this change would extend overtime eligibility to some 4.2 million Americans.
While the New Rule was finalized back in May of 2016, the Department of Labor allowed businesses until December 1 to implement the New Rule. Many businesses worried about the administrative headache the New Rule would cause. Twenty-one state attorney generals and several large pro-business groups challenged the legitimacy of the New Rule.
Does the US Department of Labor have the authority to make sweeping changes through its rule making procedures without Congress’s approval of the revised regulations? That’s the question at the heart of the litigation which resulted in the injunction. While there is historical precedent for the agency to do so, the court is examining the scope and impact of the New Rule and the Department of Labor’s rulemaking authority.
In his 20-page order, US District Judge Mazzant wrote, “Due to the approaching effective date of the final rule, the court’s ability to render a meaningful decision on the merits is in jeopardy. A preliminary injunction preserves the status while the court determines the department’s authority to make the Final Rule as well as the Final Rule’s validity.”
How Are Employers Handling the Injunction?
The temporary injunction means that businesses will not be penalized for not implementing the New Rule. However, for some, they have spent the last six months working out the details of how these changes will affect their business.
Some employers have already given raises to employees so that they would not be eligible for overtime or changed work hours to manage the cost of additional overtime obligations. If your company has done either one of these things, it is within their prerogative to do so. It is also within their prerogative, although not a popular choice, to rescind a promised salary increase that was given in order to accommodate the New Rule. With the temporary injunction, your employer no longer has to comply with the Final Rule.
What Does a Temporary Injunction Mean?
The court is asking for time to review. While this doesn’t mean the New Rule is dead, the rule was backed by the Obama administration and was not an act of Congress. Litigation and the appeals process are likely to drag out until after Trump takes office. It is unclear whether the Trump administration will rescind or otherwise modify the Final Rule.
We will all have to wait and see. Keep an eye on this space for updates.
Are you concerned about your overtime pay or a misclassification as exempt? Do you believe you should be eligible for overtime and haven’t received it? If so, contact Wenzel Fenton Cabassa, P.A. today. Our initial consultation is free.