In May of this year the US Department of Labor proposed a final ruling to increase the minimum salary threshold for exempt employees from $23,600 to $47,476 annually or from $455 to $913 per week. As a result of the ruling, starting December 1st, exempt employees earning less than $47,476 were to become eligible for overtime pay consistent with Fair Labor Standards Act, a change that was expected to impact an estimated 4.2 million Americans.
On Tuesday, November 22nd, just days before the December 1st deadline, a federal judge in Texas issued a nationwide preliminary injunction that has delayed indefinitely the effective date of the new overtime rule.
In addition to recent opposition from the US Chamber of Commerce and other business groups, in October, twenty-one states filed an emergency motion for the injunction. The basis of the case was that the DOL overreached beyond its authority in raising the salary threshold so high and in implementing the provision to automatically increase the threshold every three years.
For employers, the preliminary injunction ultimately means the new overtime rule will not take effect as planned on December 1st, and that any changes made by employers to prepare for the change such as increasing salaries or reclassifying employees to hourly status should be readdressed at the employer’s discretion until a final decision is reached at a later date. Employers are not required to move forward with their proposed changes as the injunction preserves existing overtime rules until the merits of the case can be adequately reviewed. It is unclear how long the injunction will remain in place.
Although the ruling does signal the possibility that the new overtime rules could be postponed permanently, it is also possible that the ruling could move forward at a later date or that some parts could remain in tact while others are removed.
Employers should not assume that the delay is permanent. In response to the ruling the DOL has stated it strongly disagreed with the ruling, “delaying a fair day’s pay for a long day’s work for millions of hard-working Americans. The department’s overtime rule is the result of a comprehensive, inclusive rulemaking process, and we remain confident in the legality of all aspects of the rule. We are currently considering all of our legal options.”
If you have additional questions regarding the proposed FLSA overtime changes or preliminary injunction, please contact 941 Payroll.