Halt to New Overtime Rule
By HLGR’s Labor & Employment Team
On November 22, 2016, a nationwide injunction was issued by a federal judge halting regulatory revisions to overtime rules scheduled to become effective on December 1, 2016. This ruling delays implementation of the Final Rule (see our discussion of the Final Rule below) and preserves the status quo while the Court determines the Department of Labor’s authority to make the rule and to determine the rule’s validity.
Employers who have already implemented or taken steps to implement changes to comply with the Final Rule will need to evaluate whether or not to reverse course. The District Court’s decision is preliminary, which means the Final Rule could ultimately be authorized by the Court, or on appeal by the Department of Labor. Significant changes are hard on both employers and employees, and an organization that has already gone through those growing pains may choose to move forward, at least until the final outcome of these proceedings.
In State of Nevada v. United States Department of Labor, 21 states filed a motion for injunction, arguing that, “(1) the States will be required to spend substantial sums of unrecoverable public funds if the Final Rule goes into effect; and (2) the Final Rule causes interference with government services, administrative disruption, employee terminations or reclassifications, and harm to the general public.” The defendants argued that irreparable harm was not established.
In his ruling, the judge wrote that there was a “prima facie case that the Department’s salary level under the Final Rule and the automatic updating mechanism are without statutory authority.”
As we announced previously in May of this year, the new rule focused primarily on updating the salary and compensation levels needed for Executive, Administrative, and Professional workers to be exempt. Specifically, the Final Rule:
- Sets the standard salary level … $913 per week; $47,476 annually for a full-year worker;
- Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to … $134,004; and
- Establishes a mechanism for automatically updating the salary and compensation levels every three years.
Additionally, the Final Rule amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.
As always, we’re here to help. Feel free to call our Labor & Employment team to discuss your specific business needs. Employees are your most valuable, and often most expensive, asset. How you handle employment issues can have a significant impact on your bottom line. Our labor and employment attorneys provide creative, strategic legal counsel – targeted to your mission and business environment. We can help ensure the most proficient use of human resources, prevent costly disruptions, and help you identify and address issues before they become costly claims or lawsuits.
We specialize in providing labor and employment advice, counseling, and litigation services to public and private employers.
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