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November 23, 2016

In a stunning decision, yesterday a federal judge in Texas issued a nationwide injunction blocking the Department of Labor’s new overtime rule.

The DOL’s rule, which was set to go into effect on December 1, would have more than doubled the minimum salary required to be paid to administrative, executive, and professional employees in order for them to be exempt from overtime pay requirements.

The current salary threshold is $23,660 per year ($455 per week). The DOL’s rule would have increased the threshold to $47,476 per year ($913 per week). It is estimated the new rule would have made 4.2 million workers across the country newly eligible for overtime pay.

Twenty-one states and a coalition of private business groups sued the DOL seeking to block the new rule. Judge Amos Mazzant of the Eastern District of Texas ruled that the DOL exceeded its authority by raising the overtime salary threshold and therefore enjoined the DOL rule from going into effect nationwide. This means that the DOL rule will not go into effect on December 1.

The injunction is only preliminary, which means the Court will have to make a final decision on the merits in the future. A different outcome, while unlikely, is a possibility, plus the DOL is likely to appeal Judge Mazzant’s decision. All of this means that the long-term outcome remains unclear for employers.

Employers should continue to monitor this situation and be prepared to implement changes, if necessary, to comply with the DOL rule if Judge Mazzant’s ruling is reversed.

For employers that have already implemented or announced changes in anticipation of the DOL’s new rule, we generally recommend going forward with those changes. Undoing a proposed salary increase, for example, could upset employee relations or lead to further wage and hour complications. As an alternative, employers may slow future wage increases over time. Also, for employees that were recently converted to non-exempt status, employers may present those employees with the option of remaining non-exempt and eligible for overtime pay or converting back to exempt status with a guaranteed salary and no obligation to punch a time clock.

Bottom line, there are potentially significant issues with undoing implemented or announced changes that will require considerable deliberation.

We will update you on any future developments involving the DOL’s overtime rule.