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Federal Court Suspends Enforcement of Overtime Rule

Wednesday, November 23, 2016  
Posted by: Sara Schaibly
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A federal judge in Texas has issued a nationwide injunction blocking the US Department of Labor’s (US-DOL) new overtime rule. The injunction halts enforcement of the rule until the case is decided.

The regulation was scheduled to take effect on December 1, 2016. It would raise the salary limit under which workers automatically qualify for overtime pay to $47,476 from $23,660. In addition, the salary threshold would be tied to the 40th percentile for full-time salaried workers in the lowest income Census region (currently the south) and updated every three years.

So what does this mean for employers? The overtime rules will not go into effect on December 1, but employers should be aware that the regulations could still be implemented at a later date. Until a decision is reached, employers should continue to follow the existing overtime regulations.


OVERVIEW OF THE ISSUE


President Obama and the US Department of Labor (DOL) have unveiled their final rules to unilaterally change the nation's overtime pay law. The rule change will dramatically expand the number of employees who can qualify for overtime pay. The proposed rule will raise the threshold for guaranteed overtime pay from a salary of $23,660 to $47,476 (or from $455 to $913 per week) beginning December 1, 2016.

Under the new rule, the salary threshold will be tied to the 40th percentile for full-time salaried workers in the lowest income Census region (currently the south) and will be updated every three years. If economic modeling projections prove to be accurate, it could rise to more than $51,000 annually when the first update takes effect on January 1, 2020.

In addition, the rule specifies that the salary level for employees who qualify for the "highly compensated employee" exemption will rise from $100,000 per year to $134,004 per year beginning in December 2016. This level is the annual equivalent of the 90th percentile of full-time salaried workers nationally and also will be adjusted every three years to the 90th percentile of all US salaried workers.

Employers looking to manage their costs should not hesitate to seek legal help to ensure compliance. The rules are complex, and there are serious financial consequences if you are found to be in violation of them. The DOL's budget for Fiscal Year (FY) 2017 includes $277 million for wage and hour division enforcement, an increase of $50 million from FY 2016. Once the rule is effective, employers should fully expect the DOL to audit employers to ensure compliance.

If you have any questions about this ruling, please do not hesitate to call us at the MITA office at 517-347-8336.

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