On Nov. 22, a federal judge in Texas enjoined the U.S. Department of Labor from implementing its new overtime rules throughout the U.S. – regulations which were to become effective Dec. 1. The new overtime rules made approximately 4.2 million more workers subject to overtime compensation by stripping them of their exemptions. This is a preliminary injunction only and the final ruling will come in the months to come. In the meantime, employers need not comply with these new rules which require employees to receive at least $47,476 per year to enjoy the overtime exemption. Employers may wish to put on hold any salary increases given to employees in order to satisfy the higher salary test.
The judge ruled that the DOL’s promulgation of these regulations exceeded its authority. The Court appeared to say that the focus as to whether an employee is exempted should not be on the amount of salary earned, but instead the actual duties performed. But, for many years, a salary threshold requirement has existed but only required an annual salary of $23,660.
The DOL stated “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.” Of course, these new regulations continue to be extremely controversial and the 21 states and various trade associations including the U.S. Chamber of Commerce appear to have great resolve in stopping these new regulations from being implemented. This case needs to be carefully watched because it also sets the tone for further attacks on other rules and regulations promulgated by other agencies during President Obama’s term.
Based on this federal court case, employers need not comply with the new overtime regulations on Dec. 1, but should remain prepared to do so in the event the decision of the federal judge is modified or overturned. Most importantly, in the last several months, I have met with numerous employers in order to ensure compliance with the new regulations. This exercise confirmed that many employers had misclassified employees as exempt under the previous regulations. These employers should not delay in reclassifying those employees previously misclassified. Remember, it is estimated that 70 percent of employers are in violation of federal wage-hour laws. Audit your wage-hour practices today!
For additional information or for audit assistance, contact attorney Bob Dunlevey, OSBA Board Certified Labor and Employment Law Attorney at 937.223.6003.