Late yesterday, a Texas federal Judge issued a nationwide temporary injunction halting the Department of Labor’s (“DOL”) new overtime regulations, which were set to significantly increase the minimum salary required for the executive, administrative and professional overtime exemptions (known as the white collar exemptions). This unexpected ruling prevents the DOL from implementing the new regulations, which were set to go into effect on December 1st.
The new regulations were introduced back in May and sought to increase the minimum salary threshold from $455/week to $913/week for individuals employed in exempt executive, administrative and certain professional positions. The regulations did not modify the existing duties test, which meant that in addition to satisfying the new salary threshold the worker must continue to meet the actual duties of either an executive, administrative or professional employee to avoid any entitlement to overtime compensation. This increase was expected to impact more than 4 million workers who were anticipating either hefty salary increases or eligibility for overtime as of December 1st.
The court held that the DOL exceeded its authority when it implemented these changes. By significantly increasing the minimum salary threshold to such a high level, the court said that the DOL essentially eliminated all the remaining requirements for the exemptions since failure to meet the new salary threshold would cause a worker to be eligible for overtime regardless of what duties they actually performed. The court found that this action exceeded the DOL’s authority and ignored Congress’s intent that it shall be the worker’s duties that will primarily govern whether the exemption has been met.
It is important to note that this ruling does not overturn the new regulations; rather, it merely puts the implementation of these regulations on hold until further review. It is possible that this same Judge or an appellate court could overturn the temporary injunction after further review on the merits. It is now up to the DOL to decide if it wishes to appeal or attempt to overturn this decision, a process that can take several more months. With appeals pushing off possible implementation into the next presidential term, it is unclear what, if anything will happen to the new regulations.
So, what are employers to do now? Many companies had already reclassified many of its workers or advised employees of future salary increases in light of the anticipated December 1st deadline. Do you take it all back? Or, do you proceed forward as planned? What about employee morale? These are all difficult business decisions that every company must make based on their own workforce. In some cases, it may be best to move forward with the changes if there were concerns about potential misclassification of employees and to avoid employee morale issues. This may particularly be the case if you are concerned about potential union organizing. For other companies where workers were being reclassified with no pay increases or other economic impact, you may be able to retract the changes with little effect to employee morale. With that said, you should consult with an employment attorney as we are all now navigating through uncharted territory.