New Federal Overtime Rule Halted: How it Impacts Your Business

new overtime rule haultedOn November 22nd, a federal judge in Texas granted an injunction that abruptly halted the implementation of a new federal overtime rule just ten days before it would go into effect.

Where does this ongoing legal conflict over the new overtime rule leave us, our businesses, and our employees?

What are we supposed to do we do now?

Overtime rule lawsuit against the Department of Labor:

21 states and the U.S. Chamber of Commerce filed a lawsuit claiming that the Department of Labor overstepped their authority by raising the salary threshold under the Fair Labor Standards Act from $23,660 to $47,476.

Judge Mazzant ruled that:

  • The Department of Labor “has admitted that it cannot create an evaluation based on salary alone.”
  • “This significant increase to the salary level created essentially a de facto salary only test.”
  • “If Congress intended the salary requirement to supplant the duties test, then Congress — and not the department — should make that change.”

Department of Labor’s response to the overtime rule injunction:

The Department of Labor expressed its strong disagreement with the decision, stating that it has the “effect of delaying a fair day’s pay for a long day’s work for millions of hardworking Americans.”

The DOL is exploring its legal options and may very well challenge the judge’s ruling.

With a new administration taking over in a few weeks, we all know that a lot remains in flux and it’s hard to predict what might happen next.

What does the overtime rule dispute mean for businesses & workers?

Many companies have already invested a lot of time and work to implement the new rules. What are you supposed to do now?

If you had not made any changes and were waiting for the judge’s decision:

You probably should hold off for now and continue to watch and wait.

If you already granted salary increases to employees to maintain their exempt status:

It’s pretty hard to take a pay bump away from someone and still keep your employee motivated. Hopefully, you’ve already figured out how to make the changes work for your business — and feel that your employees are worth higher pay anyway!

If you have exempt employees who were going to be reclassified as non-exempt when the new overtime rules went into effect on December 1st:

You might want to wait and see what happens. You can explain to your staff that the new regulations are on hold, so the changes are also paused until the law is figured out.

If you have already changed employees’ classifications from exempt to non-exempt:

It’s time for a conversation with your employees. The current law still stands, so your exempt employees remain exempt — as long as the new rules are on hold.

Workers have mixed reactions to prospect of overtime pay:

Surveys have shown that some employees were happy about the prospect of getting paid overtime, and some felt that the change to being paid by the hour was demeaning, so your employees may have had a mixed reaction.

The simplest path forward is probably to rely on the current regulations.

Remember that compensation is a sensitive subject:

Our job as business managers, supervisors, and owners is to ensure that our employees feel valued and rewarded.

For your staff, talk about classification is actually talk about compensation. It’s important for us to remember that and to be sensitive about it.

As one of my team said to me today, it’s like a parent promising to take their child to Disneyland and then announcing “I was just kidding!” a couple of days before the trip. You must set aside your personal feelings about the DOL’s rules or the judge’s opinion, and be mindful of how this impacts your employees and their morale.

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