VanAntwerp Attorneys, LLP
Phone: 606-618-0698

Judge blocks overtime rule, making chances of implementation unlikely

Many employers throughout Kentucky and the nation have spent the past several months preparing for a change in the federal overtime regulations that were set to take place on December 1. The Department of Labor's new regulations would have extended overtime pay to employees who make up to $47,476 annually, or $913 per week, which more than doubles the current levels of $23,660 annually, or $455 per week. According to the Department of Labor, more than 4.2 million workers would have been impacted by the changes.

On Tuesday, however, a federal judge issued a nationwide injunction to block the rule from taking effect on December 1, making it unlikely that it will come to fruition at all. 

Why was the rule changing?

The rule was purportedly changed as a means to simplify and modernize the overtime rules. The Obama administration and the Department of Labor hoped that increasing the salary threshold for overtime pay would provide a boost to wages - especially for low-income workers - or reduce the number of overtime hours being worked without receiving time-and-a-half overtime pay.

Who opposed the rule?

In September, more than 50 business groups and 21 states filed lawsuits arguing that the Department of Labor lacked authority to increase the salary level requirements. They also argued that the rule would increase state government costs and cause many businesses to suffer financially.

The lawsuits were eventually consolidated into one. It was heard by a federal judge in Texas who has preliminarily sided with the claimants and issued a preliminary injunction in their favor.

What happens next?

The Department of Labor's Final Rule implementing the regulations has been preliminarily enjoined, preventing the regulations from going into effect on December 1 and until a final decision by the Court is made. Although the Department of Labor could appeal the ruling - and says it is considering doing so - it may not get very far.

President-elect Donald Trump has come out in opposition to the rule. When he takes office in January, it is very possible that the Department of Labor would stop pursuing an appeal.

What does this mean for businesses?

It seems likely at this point that the new overtime rule will not go into effect, meaning businesses would not be expected to comply. However, the recent ruling is only temporary and the decision could be changed.

Employers who have already implemented salary increases or other modifications in anticipation of the change will need to consider whether to roll back the salary increases or other changes.

For any rollbacks, and where employers have not implemented changes, there could be implications if the preliminary injunction is lifted and the rule becomes effective with retroactive application back to December 1. Should this happen, it would be important for employers to track hours for those employees who would be affected by the rule change.

Employers should give considerable thought on how to communicate any rollbacks or other changes to employees. If you have questions about the overtime regulations and what steps should be taken in light of the recent national injunction, please contact VanAntwerp Attorneys, LLP partners Leigh Gross Latherow or Mitchell Hall

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