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Judge Halts Implementation of Overtime Rule

November 29, 2016

A recent federal court order will affect the large number of businesses preparing to implement the U.S. Department of Labor’s new federal overtime rule.  

The overtime rule, which was supposed to take effect on December 1, 2016, was halted on November 22, 2016, by a federal judge in Texas.  Employer compliance with the rule is now on hold while the judge reviews the case.  The rule was expected to affect approximately 4.2 million currently exempt workers. 

The Fair Labor Standards Act (FLSA) overtime rule has always mandated that nonexempt employees be paid time and a half for time worked over forty hours per week.  The new overtime rule increased the number of nonexempt employees. To prepare for this increase, businesses have taken different approaches. Businesses have responded by increasing employee salaries so they remain exempt, prohibiting employee overtime, or adjusting employee pay rate.  The other, and most costly, option is for businesses to keep employee salary and pay rates the same and begin paying overtime to the new, nonexempt employees.

For employers affected by this rule, the stall in its implementation may bring both good and bad news. The delay comes as good news for employers worried about incurring costs and new regulatory burdens. With this new injunction coming so close to the date of implementation, however, many employers have already changed their policies.  The timing of the halt puts employers in the precarious position of having to decide whether to maintain these changes or put them on hold.  For employees, a reversal to any already implemented changes may put them at odds with employers.  For employers who spent hours researching and changing their payroll structure, this may also come as unwelcome news.

Although the rule has been put on hold indefinitely, employers should keep an eye out for an appeal before the end of the current administration. If you have questions about what this court order means for your business and wish to speak with an attorney, please contact HoganWillig at 716-636-7600.  HoganWillig is located at 2410 North Forest Road in Amherst, New York 14068, with additional offices in Buffalo, Ellicottville, Lancaster, and Lockport.