On Nov. 22, 2016, the Eastern District Court of Texas issued an injunction blocking the implementation of the Department of Labor’s (DOL) Overtime Rules, which were set to go into effect Dec. 1, 2016.
As a result, more than 4 million American workers may not qualify for 1.5 times their base rate of pay for each hour worked beyond a typical 40-hour week. Despite the current delay and potential end to the regulations, businesses must still be in compliance with the existing overtime pay rules and classify employees accordingly.
The new regulations, issued in May 2016, called to double the annual salary under which full-time employees would qualify for overtime pay to $47,476, an amount that was set to increase automatically every three years.
Many businesses spent the past six months preparing for the rules by investing time and money in new systems to help classify workers and track their hours. Some businesses reduced the hours of existing salaried workers, while others hired more part-time workers to avoid paying time and a half.
With the court’s recent decision, businesses that were waiting to implement the rules on Dec. 1 held off on taking any further action while maintaining their compliance with the current regulations, which call for paying overtime to salaried workers earning $23,660 annually.
However, if the injunction is lifted, these employers should be prepared to not only implement the new law quickly, but also to make retroactive payments to those workers who should have been paid overtime during the injunction period.
Conversely, employers that already adapted to the new regulations and communicated the change to their workers should consult with tax and legal counsel to determine their employee compensation obligations under state law, as well as whether they should revert back to the old rules or move forward with their plans.