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New Overtime Rule Delayed, Possibly Scrapped

Businesses, breathe easier: the new overtime rule, most widely known for raising the threshold overtime exemption for salaried employees, originally set to take effect December 1, 2016, may be scuttled altogether. On November 11, 2016 Texas U.S. District Judge Amos Mazzant granted an Emergency Motion for Preliminary Injunction, effectively blocking implementation of the rule. The Department of Labor appealed the decision on December 1, 2016, but recent developments suggest that the new administration may abandon the appeal and the rule altogether. In late January, the Department of Justice, on behalf of the Department of Labor, asked for a pause in the case to allow the new administration to consider its position on the matter.

The amendment process for the overtime rule began on July 6, 2015, when the Department of Labor published a Notice of Proposed Rulemaking. The department intended to provide an update to certain aspects of the Fair Labor Standards Act (FLSA), particularly to update the exemptions of executive, administrative and professional (EAP) employees. The proposed updates targeted salary levels necessary for the EAP exemptions and included a mechanism for future updates of these exemptions.

In May 2016, the Department of Labor announced the upcoming publication of the Final Rule, expecting it to take effect December 1, 2016. Many employers began implementing changes to comply with the December 1 deadline. Under the new rule, the EAP exemption qualifiers would be changed. The new guidelines would have required employers to pay overtime for salaried employees that make less than $47,476 per year, which is at the 40 percentile of full-time salaried earners in the lowest-wage Census Region. The guidelines also set the total annual requirement of highly compensated employees at $134,004 (the 90percentile of full-time salaried employees), and provided for updates based these percentiles every three years.

From its inception, the rule faced strong opposition. Prior to the injunction, the rule was challenged by Attorneys General from twenty-one States. Opponents of the rule argued that the new regulations would place a strain on small businesses. Some claimed that the effects of the rule would kill small businesses. Those supporting the rule argued that an estimated 4.2 million workers would see an increase in their annual pay.

As a result of the delay and future uncertainty of the rule, employers remain in limbo. Many businesses see the delay as a reprieve, while others that have already made changes to comply with the anticipated codification of the regulations are now left to decide whether their changes can be realistically unwound.

If you questions on the impact of these changes on your business, please contact Briar Siljander ([email protected]) or Catherine Riesterer ([email protected]) at 810-227-3103.

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