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On November 22, 2016, the United States District Court for the Eastern District of Texas granted a motion to enjoin the implementation of the Depart of Labor’s (DOL) new overtime rule, which was scheduled to go into effect on December 1st, 2016. Under this new rule or “Final Rule” as designated by the DOL, employers would no longer be allowed to exempt employees who made less than the 40th percentile of full salaried employees in the lowest-waged region of the country. In essence, if an employee were to earn less than $47,476 annually or $913 dollars per week, under this new “final rule” they would be eligible for mandatory overtime.
Currently, the Fair Labor Standards Act states that “‘any employee employed in a bona fide executive, administrative, or professional capacity… as such terms are defined and delimited from time to time by regulations of the Secretary, shall be exempt from minimum wage and overtime requirements.” This allows for employers of “white collar” employees to not have to pay additional overtime to their employees as long as the made above the imposed level. The current level of compensation ceiling is $413 a week or $21,476 annually. The “final rule” was set to raise this level to $913 or $47,476 annually.
Needless to say, this rule represented a significant change to federal overtime requirements. According to DOL statistics, this new rule would have affected 4 million workers within its first year of implementations. Additionally, given that the salary requirement would be linked to a moving salary scale, this number could increase or decrease over time causing more or fewer people to be covered by mandatory overtime rules. If this rule had been implemented, it would have affected all business nationally.
The court cited these above-mentioned national effects as part of their reasoning for the injunction. With these effects in mind, the court stated that this new rule would have had noticeable consequences for employers nationwide and that the federal government had overstepped their constitutional abilities in an attempt to promulgate these rules. Furthermore, the court felt that this issue should be dealt with at the state level. As a result, the court granted the motion for an injunction seeing it as the most appropriate method of limiting the implementation of this “final rule” while still allowing for a potential of reconsideration by the court.
As of now, employers do not have to follow the new standard and only have to abide by the former exemption line of $21,476. The DOL may choose to fight this injunction but as of now, have not. With that mind, employers should still take the time to look at the potential effects that this rule may have on their particular business and if necessary contract the appropriate legal counsel.