As we reported last week, a federal judge in Texas has blocked the Department of Labor’s (DOL’s) new federal overtime rule, which would have raised the Fair Labor Standards Act’s (FLSA’s) salary threshold for exemption from overtime pay from $23,660 to $47,476. Whether one thinks the judge’s action is correct or not, one thing is certain: Thousands of business owners across the country are confused because they had already taken steps to comply with the threshold exemption slated to begin two days from now (Thursday, December 1, 2016). (However, as we reported in September, almost half of small businesses weren’t aware of the new regulations.)


According to Lisa Nagele-Piazza of the Society for Human Resource Management, from a legal standpoint, until a final decision is reached, employers may follow the existing rule. However, as an employer-employee relationship issue, the most common answer one receives when asking the experts is this: “It depends.”

It depends on whether or not an employee has already received a raise or change in employee status that would make them eligible for (or, stated differently, “not exempt from”) overtime pay.

If you’ve done nothing in anticipation of the change, it’s your lucky day: Continue doing nothing.

If you have done something, your choices are not as good: Once an employee believes more money will be coming into their pocket, it is a blow when they learn it’s being removed. So it depends, ultimately, on management decisions rather than pure legal or business decisions.


Here are some quick answers Lisa provides on the SHRM website. (The link at the bottom of this article provides more in-depth explanations.)

Q | Does a company have to do anything by the Dec. 1 deadline?
A | No.

Q | Is the judge’s ruling the final step?
A | No. A preliminary injunction isn’t permanent and will be reviewed by the court. However, the judge wouldn’t have granted the preliminary injunction unless he thought the challenge had a substantial likelihood of succeeding.

Q | Can the Labor Department challenge the decision?
A | Yes. The department said in a statement that it is currently considering all of its legal options.

Q | Does this ruling apply to all employers nationwide?
A | Yes.


What should a company do that has already either raised exempt employees’ salaries to meet the new threshold or reclassified employees to nonexempt status?

Employers will likely want to leave decisions in place if they have already provided salary increases to employees in order to maintain their exempt status, according to Alfred Robinson Jr.,a former acting administrator of the DOL’s Wage and Hour Division. It would be difficult to take that back. If there are exempt employees who were going to be reclassified to nonexempt, but haven’t been reclassified yet, Robinson said employers may want to postpone those decisions and give the litigation a chance to play out. “This should be a welcome sign for employers, even if they’ve already made changes,” Robinson said. “They can at least hold off on further changes.”


Also on SmallBusiness.com

Overtime Pay Rule Overturned: Federal Judge Rules in Favor of States, Business Groups | 2016

VIA | SHRM.Org The Overtime Rule Has Been Blocked. Now What?