In the news: Court Blocks New Federal Overtime Rule – What does this mean?


The new overtime regulations were set to go into effect on December 1st are now on hold after a Texas court blocked the Department of Labor from implementing the rule change nationwide.

This means businesses and employers may continue to follow the existing overtime regulations until the court has a chance to review the legality of the rule.

On May 18, 2016, the Obama administration made changes to the Fair Labor Standards Act (FLSA) raising the nation’s salary cap from $23,000 per year to $47,476 per year ($913 weekly). The Department of Labor estimated the change would make over 4 million American workers eligible for time-and-a-half pay whenever they worked more than 40 hours in a given week. This change would have the greatest impact on nonprofit groups, retail companies, hotels and restaurants, which have many management workers whose salaries are below the new threshold.


[Read more: FLSA Overtime Exemption Rules by the Numbers]


In September 2016, 21 U.S. states filed a lawsuit to delay the FLSA regulations from going into effect on December 1st. The states argued that the Department of Labor’s new rule would force states and business to significantly increase compliance and labor costs for employers who would have to track hours more meticulously.

On November 22, 2016, Judge Amos L. Mazzant of the U.S. District Court for the Eastern District of Texas granted the motion, temporarily barring the regulations from going into effect nationwide.

A preliminary injunction is not permanent, and the overtime rule could still be implemented later down the road. 

What does this mean?

Forbes magazine tells us: We don’t know, if nothing happens before January 20, there’s a strong possibility the Department of Labor simply withdraws the changes and the rule would not go into effect.

For employers who raised employee wages past the $47,000 cap, most lawyers are advising to leave the changes in place. To take the raises back would risk an employee relations nightmare.

If there are exempt employees who were going to be reclassified to nonexempt but haven’t been reclassified yet, you may want to postpone those decisions and give the injunction a chance to play out.