Labor-law attorney reacts to court ruling blocking new federal overtime rule

Area employers who had prepared for a new overtime rule to take affect on Dec. 1 are readjusting after a Nov. 22 federal court ruling that prevented the new rule from taking effect.

A judge on the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction preventing the U.S. Department of Labor from implementing and enforcing the new overtime rule.

Business groups and several states had filed lawsuits challenging the new overtime rule, seeking to delay or prevent its implementation.

The new rule would have doubled the minimum salary level to $47,476 per year, or $913 per week, for employees classified under the white-collar exemptions for overtime pay.

White-collar exemptions are those applicable to executive, administrative, and professional positions.

“That is a minimum salary threshold that an employee must earn in order to qualify for one of the white-collar exemptions … under the Fair Labor Standards Act,” says Christian Jones, labor-law attorney with Syracuse–based law firm Mackenzie Hughes, LLP.

Those positions are exemptions to the federal requirement under the Fair Labor Standards Act that any hours worked beyond the standard 40 hours per week are entitled to overtime pay equal to time-and-a half an employee’s regular rate.

To qualify as exempt and not eligible for overtime pay, the positions have to meet certain requirements pertaining to job duties and salary level, according to Jones.

Deciding
Prior to the Nov. 22 court ruling, employers had to make a decision, figuring the overtime rules would begin on Dec. 1.

Some either raised salaries to meet the minimum threshold or indicated to the affected employees that their salaries would increase.

In those cases, the ruling may be too late, Jones noted, considering the administrative process involved and that it just might not be practical.

“It’s difficult to walk back a promised raise,” says Jones.

For those employers who had decided to reclassify exempt employees with salaries below the threshold to nonexempt and pay overtime, this ruling does allow companies to eliminate the reclassification.

“That’s an easier scenario to walk back. It doesn’t mean they’re required to,” says Jones.

Moving forward
Before scrapping the reclassification, Jones says affected employers should be aware that the U.S. Department of Labor could appeal the ruling to the Fifth Circuit Court of Appeals in New Orleans.

If the Court of Appeals reverses the decision, it could generate a legal issue, according to Jones.

It would have to be determined if those employers who were not in compliance on Dec. 1 bear any liability for overtime pay between the Dec. 1, 2016 effective date and the date the Court of Appeals issues its decision, he noted.

Another factor for employers to consider is what impact the upcoming Trump Administration will have on this matter.

It is possible, according to Jones, that Congress may pass legislation blocking the rule entirely, delaying its implementation, staggering the wage increases over time, or setting a lower wage threshold.

Jones figures President Obama would veto any such legislation, while President-elect Trump could sign it, should such legislation reach his desk.

“There is … quite a bit of uncertainty at this stage of the game as to where this will end up,” he says.

Contact Reinhardt at ereinhardt@cnybj.com