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Federal Court Halts New Overtime Rule: What Should Employers Do Now?
December 1, 2016
A federal district court judge recently issued a nationwide preliminary injunction halting implementation of most of the U.S. Department of Labor’s (“DOL”) new overtime rule. The most controversial aspect of the new overtime rule required an increase in the minimum salary threshold for executive, administrative and professional exempt employees from $455 per week, or $23,660 annually, to $913 per week, or $47,476 annually. The recent decision enjoins the application of this new salary threshold. While many employers are pleased with the decision, for others it is a case of too little and too late, having already communicated salary changes to employees in anticipation of the rule’s December 1st effective date. So, the question remains: what should employers do now?
The first thing to consider is this is a temporary injunction. While currently there is no need to implement changes by December 1st, employers who choose not to do so should be prepared for immediate compliance if the decision is reversed on appeal. For employers who have not communicated salary changes to employees, a wait and see approach is best, though not entirely without risk. Should the decision be reversed on appeal, there is the potential the rule could be implemented retroactively to the original December 1st deadline. For example, in 2014, in the context of new overtime rules for home healthcare workers, a judge in the United States District Court for the District of Columbia issued an injunction, which was later vacated. Following the vacatur, other federal district courts considered whether the rules could then be enforced retroactively, with a near even split in outcomes. Appeals are still pending in those decisions. Thus, to mitigate against the risk of retroactive compliance, employers who delay compliance should track hours worked for all employees whose status will change from exempt to non-exempt under the new rule. In the event the rule is applied retroactively, employers will then be able to promptly pay any overtime owed and potentially avoid harsh wage violation penalties.
Employers who have already communicated salary changes to employees should assess the morale risk associated with reversing the change in light of the court ruling. A message reversing the change could be softened by communicating to employees that while all planned changes are halted pending further court action, the employer will continue to monitor the situation and keep employees apprised of any developments.
This Alert is provided for information purposes only, and does not constitute legal advice. According to Mass. SJC Rule 3:07, this material may be considered advertising. ©2016 Posternak Blankstein & Lund LLP. All rights reserved.