What happened to the new federal overtime rules and what impact will a new administration have upon them? A US District Judge in Texas issued an injunction to implementation of the new laws back on November 22, 2016 – days before the law was scheduled to take effect on December 1. The new regulations would have substantially changed worker’s eligibility for overtime and significantly increased the amount of information required to be provided on a pay stub. Many San Diego companies took substantial steps to come into compliance prior to the injunction.
The US Department of Labor (DOL) appealed the injunction, and the Court has agreed to the DOL’s request for an expedited ruling. However, that did not occur before the new administration came into power. President Trump has appointed a new nominee to be Secretary of Labor who strongly opposes the measure. Congressional Republicans have announced plans to revoke the new regulations in the new Congress through use of the Congressional Review Act.
Ok, so what happened to the new federal overtime rules and how does that affect a San Diego employer? 21 US States filed the federal lawsuit in Texas challenging the DOL and the new overtime rules. Several dozen businesses filed a separate suit as well. The two lawsuits were consolidated and the central argument of the plaintiffs argued the DOL had exceeded its authority in establishing the new regulations. These plaintiffs asked for and received an injunction to prevent the new rules from taking effect. The plaintiffs argued the new salary level was “increased to such a degree that the tests for the EAP exemptions had become, in essence, a salary level test only.”
Judge Amos L. Mazzant ruled that the plaintiffs had a substantial likelihood of prevailing on their argument that the DOL had exceeded its authority. Judge Mazzant issued the injunction until questions surrounding whether the new regulations were “properly authorized” could be answered.
It is interesting to note that Judge Mazzant found the DOL’s application of a minimum salary level “improper” when the plain meanings of “executive,” “administrative,” and “professional” in context of the new regulations made it clear to His Honor “Congress defined the EAP exemption with regard to duties, which does not include a minimum salary level.” The sharp increases in the minimum salary levels established by the DOL in the new guidelines was “essentially a de facto salary-only test.” The Judge explained that the DOL’s regulations and final rules required employers to pay overtime to any employee who is below the increased salary level regardless of the work performed. This, the Judge believed, is in direct conflict with the intent of the US Congress. “[T]he Department exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test.”
So, what happened to the new federal overtime rules and what should we expect in 2017? It appears likely that the new regulations will be severely modified or scrapped altogether. Many employers have already implemented the new changes and are stuck in a precarious position. They face significant morale and perhaps legal issues if they reverse course, and most have decided to simply continue their new policy. Regardless, the issue of carefully documenting every aspect of hours worked, overtime and internal policies, practices and communications has not changed.