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Ready to Implement the New Overtime Rules? Not So Fast, says a Federal Judge in Texas

For over a year employers have been adjusting business practices, educating their workforce and outright scrambling to ensure compliance with the new Fair Labor Standards Act (“FLSA”) overtime regulations (the “Rule”), which more than doubles the current salary requirement for certain exempt employees.  Now, with just over a week before the Rule goes into action, a federal judge in Texas put the brakes on, leaving many employers in continued disarray.

It all started in October when twenty-one (21) states filed an emergency motion for a preliminary injunction in a concerted effort to stop the Rule.  It now appears that their efforts paid off. Specifically, a federal judge granted the request for a preliminary injunction, stating the Department of Labor (“DOL”) exceeded its authority by both raising the salary requirement to such an extent and by building automatic salary adjustments every three (3) years.

The DOL issued the following statement: “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. . . The department’s overtime rule is the result of a comprehensive, inclusive rulemaking process, and we remain confident in the legality of all aspects of the rule. We are currently considering all of our legal options.” As a side note, while the DOL is currently considering all legal options, it cannot be overlooked that with the changing administration comes changing viewpoints.  Importantly, if the matter plays out until after the President-Elect takes office, the DOL may be directed to change tactics, either by dropping legal action or going back to the drawing board to revise or redraft the Rule.

So what does this mean for employers, many of which have already taken action in response to the Rule that was expected to go into effect on December 1st?  From a legal perspective it means maintaining the status quo, namely employers can choose to abide by the FLSA overtime regulations in their current and familiar form without any changes.  It also means realizing this is only a preliminary injunction and the Rule could still be implemented, only later than the currently planned December 1st deadline.

From a practical perspective, however, it means that while this is playing out, employers will need to evaluate a number of new issues related to its current action plan to implement the Rule.  Specifically, there will need to be at least three immediate discussions:  First, how to handle employees that have already been provided with a wage increase to comply with the Rule.  Second, how to handle currently exempt employees that have not yet been reclassified as non-exempt. Third, how to address, modify or amend any policies or procedures that were put in place in anticipation of the Rule’s December 1st effective date.  The decisions emanating from these discussions can impact not only the company’s bottom line, but also employee morale and public perception.

Rinke Noonan stands ready to provide guidance and to answer questions about the new FLSA overtime regulations, the recent decision halting their implementation and its impact on your business.  Rinke Noonan employment law attorney Chad A. Staul can be reached by email at cstaul@rinkenoonan.com or by phone at (320) 251-6700.

© 2016 Rinke Noonan