New Overtime Rule Stayed Pending Resolution of Federal Court Injunction

In May 2016, the Department of Labor (“DOL”) issued final rules regarding minimum overtime salary levels. The new overtime rule was intended to go into effect on December 1, 2016 and requires that nearly all salaried employees earning less than $913 per week, or $47,476 annually, be eligible for time-and-a-half overtime pay; more than doubling the previous minimum salary level. The new overtime rule also mandates that future automatic updates to the new minimum salary levels will occur every three years, starting January 1, 2020.

On November 22, 2016, a federal district court judge in Texas enjoined the Department of Labor from implementing the new overtime rule on December 1, 2016. This injunction was the result of a suit brought against the DOL by several states, business groups, and the U.S. Chamber of Commerce. The Plaintiff parties claim that the DOL exceeded its regulatory authority by substantially raising the salary threshold and providing automatic updates. The preliminary injunction will halt the implementation of the new overtime rule until the case is fully adjudicated.

Employers make take a risk by not implementing the new overtime rule on December 1, 2016. If the injunction is vacated by the district court judge or on appeal before the 5th Circuit, employers that elect to defer compliance may still have liability exposure for those employees who should have been treated as nonexempt. Employers should still have a plan to move forward under the new overtime rule, if necessary.