The Overtime Train Is Stopped Dead in its Tracks

On November 22, 2016 by Alix R. Rubin, Esq.

News Flash:  The new overtime rules are dead! The new overtime rules are dead!stop-train-image

Judge Amos L. Mazzant III of the U.S. District Court for the Eastern District of Texas just issued a nationwide preliminary injunction enjoining the U.S. Department of Labor’s increase in the salary threshold for employees exempt from overtime that was set to take effect Dec. 1st.

This means that nothing will change, and salaried employees who earn only $455 a week or $23,660 a year and whose primary duties are executive, administrative or professional will not be eligible to receive one and a half times their hourly rate for all hours worked over 40 in any workweek.

This decision is the result of two lawsuits filed in September by 21 states and business advocacy groups. The judge’s rationale? The higher salary level improperly swallows the rest of the exemption test, making salary alone dispositive, which the Department of Labor has admitted it cannot do. In plain English, the new rule would have improperly made 4 million workers eligible for overtime without any change in their duties, simply because their salary would not have met the significantly increased threshold.

Why does a Texas court hold sway over the entire country? First, this is a federal court located in Texas. Second, Judge Mazzant held that, since the new regulations are applicable to all states, the injunction must be, as well, so that employers and employees are not subject to different overtime exemptions based on their location.

Employers will have their turkey and eat it, too, as it is unlikely that the new Trump administration’s more business friendly Secretary of Labor will revive the new overtime regulations. However, the duties tests for the white-collar exemptions are still alive and well.

So it can’t hurt to audit your exempt positions on an annual basis to make sure they still meet these tests. And for non-exempt employees, make sure you have accurate time-reporting procedures in place and an overtime policy that mandates discipline — but not the docking of pay — for employees who work overtime without prior approval.

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