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Judge blocks new overtime regulations: what this means for your business

[Written for Replicon blog]

Just days before its implementation, the new federal overtime rule has been stalled indefinitely by a nationwide injunction from a Texas-based federal judge.

Originally scheduled to take effect on Dec. 1, 2016, the new overtime regulation intends to raise the salary limit for those exempt from overtime to $47,476 (the current limit is just $23,660, and hasn’t been updated in the past 12 years). The regulation, which would increase the number of overtime-eligible workers by millions, was criticized by various business groups as potentially harmful to nonprofits and small businesses.

The judge — Amos L. Mazzant III of the Eastern District of Texas — cited an overstep by the Obama administration in such a substantial salary threshold increase. While this preliminary injunction currently only delays the overtime update, the language in Mazzant’s ruling suggests future attempts to strike down the new regulation entirely.

Despite a 21-state lawsuit filed against the DOL’s new regulation in September, many organizations didn’t expect Mazzant (who was appointed by President Obama) to rule in favor of an injunction, and have already raised salaries in anticipation of increased salary thresholds come Dec. 1.

Next steps

For now, Mazzant’s injunction should be considered temporary, and the implementation of the new overtime regulations simply delayed. In a written statement, the Department of Labor “strongly disagree[s] with the decision by the court,” which “has the effect of delaying a fair day’s pay for a long day’s work.” The DOL goes on to state that they are “currently considering all legal options,” and will likely file an appeal.

With this law on hold for now, it might be tempting to rollback salary adjustments already made or promised on an employee level. Of course, reneging on promised raises is difficult even with impeccable communication, and risks plummeting employee morale. Each workplace is unique and there is no one-size-fits-all approach to addressing these recent developments. Planning on reclassifying workers but haven’t yet? Consider postponing your decision and closely monitoring policy developments as they arise. Already raised salaries? Consider maintaining those raises and scaling back in other areas. Find an approach that causes the least amount of disruption possible, while still giving you room to adjust to potential changes down the line.

Currently there is no timeline for when to expect the final ruling, and if the judge ultimately finds that the DOL has not overreached its authority, then companies should stay ready to comply with changes as originally planned. While Mazzant’s ruling is both highly-publicized and controversial, the reality is that regulations surrounding wage and labor laws are constantly in flux. New York state, for example, seems to be raising salary thresholds for overtime regardless of the ultimate federal ruling, and changes like this keep coming — at local, state, and federal levels. In light of this recent overtime injunction, and in anticipation of labor law changes to come, look at this as an opportunity to find ways to position your company to be more agile in adapting to policy changes.