You may have heard in the news today that a federal court in Texas issued an order blocking the new overtime rule from going into effect on December 1. This order takes effect immediately, and applies nationwide. The order is known as a preliminary injunction, and while it can be overturned by the judge who granted it as well as appellate courts, at least for now, the “time-out” that many employers were seeking, has been granted.
What this means:
The status quo is preserved until further notice. This means that the salary threshold for determining whether white collar workers are exempt from overtime will remain at $455/week instead of the $913/week to which it was scheduled to rise on December 1 (annually, $23,660 instead of $47,476). Today’s order also means that the provision of the new rule, which would have allowed employers to count non-discretionary bonuses toward up to 10% of an employee’s salary, does not apply. Finally, the automatic increase in the salary level, which was anticipated for January 1, 2020, is also on hold.
THE RULING DOES NOT CHANGE THE IMPORTANCE OF THE DUTIES TEST:
One wake-up call for many employers who heard about the new (now delayed) rule, was the realization that an employee who makes more than the minimum salary level, may still not be entitled to an exemption from overtime, if their job duties do not fit within the guidelines for executive, administrative, or professional workers. That is not going away. Employers must still determine that their white-collar worker is paid on a salary basis, the worker must clear the salary level, and the employee’s duties must still be of an executive, administrative, or professional nature.
What should employers do?
First, take a deep breath. If you’ve been preparing for the new rule change, your efforts are not wasted. If employees would have been exempt under the new rule had it taken effect, they will still be exempt now. But if you had white collar workers who failed the exemption solely on the salary basis test, those workers may be exempt from overtime so long as the other elements of the test are satisfied. We stress the importance of ensuring that these workers still satisfy the relevant job duties test, and if you haven’t done that analysis, we still encourage all employers to seek qualified advice. In our experience presenting on this topic over the past several months, many employers simply assumed that any office worker who was paid over $23,660 per year was exempt from overtime. That was not the case before the rule was published in May, and today’s order does not change that.
However, as a result of today’s order, if you had white collar workers who passed the duties test and were paid on a salary basis, then you don’t have to pay those workers overtime so long as they are paid at least $455 per week (at least until January 1, 2017, when this level will be impacted by a change in Maine law that will be the subject of a separate post). Think carefully about the conversations you were having with employees, some of whom may have been expecting a raise if that was part of your organization’s strategy for dealing with the (now stalled) new rule. You’ll want to handle those situations delicately and on a case-by-case basis. Finally, remember this does not apply to “blue collar” workers and certain other office workers.
WHAT’S NEXT?
This is a rapidly evolving area of the law. The overtime rule is one of many employment rules that is likely to be affected by this month’s Presidential election. While the Department of Labor can appeal today’s order, such an appeal is unlikely to be considered before the new President takes office in January. The new administration could withdraw its opposition to this order, and it could withdraw the rule that was published in May 2016 in its entirety. The absence of a ninth Supreme Court Justice could also have an impact on any appeals of today’s order. We will continue to monitor this issue and will continue to share updates with our clients as this issue develops.
If you want to read the Order itself, you can find it here: doc-60_mem-opinion-and-order