Employers Have More to be Thankful For: New "Salary Basis" Overtime Rules Enjoined

Most employers have been frantically preparing for the new overtime regulations issued by the Department of Labor. Due to go into effect on December 1, those regulations would have doubled the required salary for the white-collar exemptions under the Fair Labor Standards Act from about $23,000 to over $47,000. Many employers have made decisions to move some employees from exempt to non-exempt status because they do not meet the new salary threshold, or to increase some employees’ salaries so that they continue to have exempt status. These changes have had real impacts on budgets and operations. Most employers were planning on making these changes effective December 1, when the new regulations went into effect.

In a surprise development, yesterday a federal court in Texas issued a nationwide injunction against enforcement of the Department of Labor's new rules. The judge (an Obama appointee) concluded the new rules have the effect of improperly de-emphasizing consideration of the duties of white collar employees, instead basing the exemption on consideration of salary alone. The court’s injunction means that the rules will not go into effect unless and until the court lifts the injunction, or a higher court overrules this court.

What Do You Do Now?

If you have already put changes into effect, you should probably give careful consideration to whether or not you reverse course. It could be a big morale problem if you try to roll back promised pay increases or re-classify employees. If you do want to roll back changes you have already made, confer with your employment lawyer before doing so.

If you have not put your planned changes into effect, you don’t have to. The injunction means that the new rules can’t go into effect for any employer, anywhere. And no one knows what the new administration will do – it may pull the new regulations entirely and not even fight the lawsuit! So, at least for now, you don’t need to put these changes into effect. And, if the court later changes course and allows the regulations to go into effect, employers will probably be given time to make adjustments.