Federal Court Blocks Overtime Rule

A federal judge recently issued a preliminary injunction stopping the U.S. Department of Labor’s (DOL) Overtime Rule from taking effect nationwide on December 1.

The injunction means that the rule won’t go into effect until the case is resolved or the injunction is lifted by the judge. The DOL will likely appeal the injunction.

“We strongly disagree with the decision by the court, which has the effect of delaying a fair day’s pay for a long day’s work for millions of hardworking Americans,” the DOL said in a statement. “The department’s overtime rule is the result of a comprehensive, inclusive rulemaking process, and we remain confident in the legality of all aspects of the rule. We are currently considering all of our legal options.”

Currently there is no timeline for the case to move forward.

The emergency motion for a preliminary injunction was filed on October 12 by 21 states. They claimed the DOL exceeded its authority by raising the salary threshold too high and providing automatic updates to the threshold without input from businesses that will be affected by it. The case was consolidated with another lawsuit brought by 50 business groups, including the U.S. Chamber of Commerce and National Association of Manufacturers, which raised similar objections.

As part of the final rule, the salary level under which employees qualify for overtime pay would have increased from $455 per week ($23,360 annually) to an estimated $913 per week ($47,476 annually). In addition, the rule would have provided for automatic updates to the threshold every three years.

Associated Builders and Contractors (ABC) came out in support of the injunction.

“Construction contractors are pleased that the court has stepped in to provide relief from another overreaching and burdensome regulation from the Department of Labor,” says ABC vice president of legislative and political affairs Kristen Swearingen. “By dramatically increasing the minimum salary threshold for exempt employees, the Department of Labor’s overtime rule would have taken workplace flexibility away from employees and may have required some employers to consider switching certain employees from salaried to hourly positions.”

Swearingen adds that the rule would also have a significant impact on commercial construction projects, “since they often last longer than three years and are carefully planned to stay on time and under budget.”

“The injunction granted today will protect employers from being forced to speculate which of their employees may be considered non-exempt under a salary threshold that could change in the middle of a multiyear construction project,” she says.

However, a lawyer who represents a group that helps run trade associations says the ruling could disrupt some workplaces.

“This is an unexpected curve ball thrown at employers who made changes in anticipation of the overtime rule becoming effective,” says Hugh Webster, a partner with Webster, Chamberlain, Bean, LLC in Washington, D.C., the legal counsel for the Association Management Companies Institute (AMCI). “One option for employers is to shelve those changes (e.g., salary raises, job reclassifications, time keeping procedures) indefinitely, pending further direction from this court (or an appeals court). Certainly it would make sense to hold off on any reclassification of an employee from exempt to nonexempt that had been planned due to the new overtime rule’s increased salary threshold.”

Webster says it’s unclear what will happen with the overtime rule.

“This judge could later decide that the rule is valid; the injunction he issued this week is not a final decision on the merits,” he says. “Or, a court of appeals could reverse the judge. But it is also unclear whether Departments of Labor and Department of Justice officials will seek an appeal with only weeks left to go in the current administration. Political observers have speculated that the incoming administration would not pursue an appeal of the judge’s ruling. There are also bills pending in Congress to delay or modify the new overtime rule, which, if passed by Congress, may be viewed more favorably by the incoming administration.”

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