On December 1, 2016, a new rule was supposed to take effect increasing the minimum salary exempt employees must receive in order to be ineligible for overtime pay. After the Department of Labor issued the new rule, several states sued seeking to stop the new rule from taking effect. Yesterday, a preliminary injunction was issued when the court found that the Department of Labor did not have the authority to declare workers eligible for overtime based on salary level alone. Instead, the judge intimated that the duties in which employees are engaged is determinative of whether they are eligible for overtime pay. As such, the new minimum salary rule is blocked from taking effect next week.
The injunction is a temporary order, and any final decision will be made after further argument and review by the court. However, the current administration is ending in a few months and it is unclear as to whether the Trump administration will challenge any adverse decision. Many business groups and Congressional Republicans oppose the rule, and depending on the makeup of the President-elect’s cabinet, it is entirely possible the Department of Labor walks away from the fight.
Many employers have been preparing for the implementation of the rule on December 1, 2016, by revising employee roles and responsibilities as well as employee compensation rates. Because of this decision, employers have the opportunity to re-evaluate whether they will go forward with those plans or if they wish to rescind some of the decisions they’ve made. In either case, employers should consult with counsel before determining their next steps.