Just 10 days prior to the planned implementation of the new overtime rule, the Texas judge’s ruling applied the brakes.
The ruling followed the October filing by 21 states of an emergency motion seeking to halt the change. According to the states’ complaint, the Department of Labor eclipsed its authority in raising the threshold so high and ordering the automatic application of triennial adjustments.
In November, the complaint was consolidated with a business law case filed by groups including the U.S. Chamber of Commerce, which lodged comparable criticisms of the new rule.
The judge’s preliminary injunction essentially freezes the current salary threshold while the court reviews the validity of the new rule and the Department of Labor’s authority in the matter.
Under the current rule — which will stay in effect for the time being — employers are not required to pay overtime to workers who earn a salary of more than $455 per week or $23,660 annually if they are classified as administrative, executive or professional.
Some employers sustain costs despite delay
The Society for Human Resource Management notes that its advocacy raised awareness about the negative impact of the new overtime rule on employers, and the group welcomed the judge’s ruling in the case.
But with the judge’s decision coming just days before the expected effective date, many employers already had taken extensive — and costly — measures to comply with the new rule.
In some cases, for instance, employers have informed workers that they’ll receive an increase in salary to keep them exempt and not subject to overtime pay. In other cases, companies have already converted some workers to the non-exempt classification and, as a result, will begin paying them overtime for hours in excess of 40 per week.
Wal-Mart is one example of companies that already made changes in anticipation of the new rule. The retailing giant reported that it raised some of its middle managers’ salaries from $45,000 to $48,500 annually to continue classifying them as exempt. In addition, a recent survey found that 56 percent of large retailers in the United States intend to move ahead with plans for raises and changes in classifications despite the injunction.
What’s next for the overtime rule changes?
At this point, it’s unclear how the incoming Trump administration might impact the fate of the changes.
With the issuance of the injunction, the new president may be able to stop the rule change simply by failing to appeal the judge’s decision. Had the judge not issued the injunction, the incoming administration would be forced to embark on a complex rulemaking process to change or expunge the rule.
While the injunction is not permanent, it does not bode well for eventual implementation of the new overtime rule, as it may indicate the judge’s belief that the states’ lawsuit ultimately will succeed in killing it.
Until the court reaches a final decision, businesses will face uncertainty. For now, employers may want to consider delaying any further reclassifications or salary changes while the litigation works its way through the courts.