Federal Judge Blocks Overtime Pay Rule

As businesses were preparing to implement the Department of Labor's new overtime rule, a federal judge granted a preliminary injunction delaying its implementation. The injunction came just over a week before the initial implementation deadline of Dec. 1, and left companies uncertain about the best course of action.From a legal standpoint, the preliminary injunction buys the judge more time to come to a final decision on the overtime rule. Until that final decision is made, however, there remains a possibility that the rule could ultimately come back into play if the judge decides to lift his injunction.

In addition, the timing of the injunction adds more speculation as to whether the rules will ever become effective. The recent change in the political landscape creates uncertainty around recent regulations passed by our current administration. House Republicans have said they are laying the groundwork for a major push to repeal the current administration’s most recent regulations. They plan to use the Congressional Review Act, which would not require a majority vote in the Senate to repeal the regulations. One of the primary regulations that might be targeted is the overtime rule.

Based on the judge’s comments regarding the new overtime rule, it seems unlikely that any final ruling would keep the rule intact. In the event the injunction is lifted, however, it does not seem likely that the rule would survive much past the January 20th inauguration.

That leaves many companies with a choice—act as if the overtime rule is currently in place, proceed as if the overtime rule was never enacted or just sit tight.

If you choose to act as if the overtime rule is in place and the injunction was not issued, you would move forward with your compliance plans. The downside is, if the injunction stands, you might pay more overtime than the FLSA would actually require.

If you choose to act as if the injunction is permanent, you would continue to calculate overtime as you always have and simply disregard any prep work you might have done. If the DOL successfully defends its position on the rule, you would move forward at that time with your compliance plans.

For those who have not already implemented or communicated planned changes, the best course of action seems to be to sit tight until the injunction and expected House challenges play out.  Once the judge has acted and Congress has voted, the way forward will be much clearer. In fact, we may know in mid-January what is required.

No matter what course of action you choose, however, you should plan to communicate with your employees the information you have. In large organizations, you might want to designate a team to handle employee questions, particularly as events move forward. 

The HORNE team will monitor any developments closely and will continue to provide you timely updates as they become available. If you have any questions on these new developments or the new rules, please let us know.

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