Federal Law Alert – Exempt Classification Change Injunction

November 23, 2016

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Summary: Tuesday afternoon, a federal judge for the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction on the Department of Labor’s new overtime rules, which were slated to go into effect in just over a week on December 1, 2016. The judge ruled that the Department of Labor (DOL) likely overstepped its rulemaking authority by raising the salary threshold as high as it did and by implementing the automatic increase every three years.

What this means now:

  1. The effective date of the rules has been delayed indefinitely.
  2. Employers may choose not to implement the changes they had planned for Dec. 1 compliance.
  3. The new rules have not been thrown out or invalidated – it is unknown at this time how this will be settled.

The judge has not made a final ruling in the case, but the fact that he issued the injunction suggests that he is leaning in favor of the groups that want to stop the rule changes. It is also possible that his final decision will allow some parts of the rule to stand but not others. The DOL has indicated that in the meantime they are considering their legal options with respect to the preliminary injunction.

Employers are obviously wondering whether they should move forward with the changes they have been planning. Unfortunately, this is a difficult question to answer and ultimately a business decision, which is much harder than a compliance decision. Although employers are not required to make changes, they may want to consider the following:

  • Will it be difficult to undo changes that have already been made? What’s best for the company and our employees?
  • How will employees feel about the decision we make and how will it affect company moral?
  • If the changes aren’t implemented now, will it be possible to make them on short notice in the future?
  • How will acting or not acting affect the bottom line considering, recruitment, retention, increased costs, schedule changes and tracking of time?

At this point, we do not know how long the injunction will be in place or if the rules will be thrown out entirely. We will be keeping an extremely close eye on this case and will issue further e-Alerts when actionable information is made available.

Read more here published by the SHRM – Society of Human Resources