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FMG Law Blog Line

With DOL’s Overtime Rule Still in Limbo, What Should Employers Do Now?

Posted on: August 31st, 2017

By: Paul H. Derrick

As most employers know, the U.S. Department of Labor announced, during the Obama administration, that it was rolling out new standards for determining when employees are entitled to be paid overtime for all time worked beyond 40 hours in a work week. The so-called “overtime rule” or “white collar” exemptions would have required employers to pay certain executive, professional, and administrative employees a salary of at least $913 each week in order to make them exempt from the overtime requirement.

But in late 2016, a federal judge in Texas enjoined DOL from implementing the new rule anywhere in the country, finding that the DOL lacks the authority to set any salary test at all. Meanwhile, the underlying case continued to progress between the parties to the lawsuit. DOL appealed the ruling to the Fifth Circuit Court of Appeals, but it asked only that the court overturn the judge’s finding that the agency lacks the authority to set a salary test. It did not ask the appeals court to stay the overall case.

Then, in July of this year, the “new” DOL, headed by a Trump appointee, announced that it was seeking public input on ways to revise the Obama administration’s overtime rule. That process remains ongoing, with any possible modification of the rule unlikely until at least late 2018. In the meantime, the Fifth Circuit is scheduled to take up DOL’s appeal during oral arguments on October 3, and a decision could come within just a few months.

Wondering what that decision might be is causing employers a good bit of anxiety these days. On the one hand, the Fifth Circuit could affirm the injunction and maintain the status quo, which would give DOL time to come up with a new rule, but one that might not necessarily be allowed to use some variation of the traditional salary test. On the other hand, the court could decide that DOL does have the authority to establish a salary test and modify or dissolve the injunction, thus paving the way for the Obama-era rule to take effect long before a replacement rule is finalized by the Trump DOL.

That latter scenario, in turn, could put both DOL and employers in a bind. DOL would have to figure out whether and how to implement and enforce a rule it already has announced it plans to change. Employers would have to assess the risk of complying or not complying with a rule that almost certainly will change within the short term. If they were to comply, any new rule that were to come along later could have a significant financial and operational impact on them. If they did not comply, even if DOL decided not to enforce the Obama rule, they could still face legal liability from employees who sued because they were not being paid under the standard set by the Obama rule.

Confusing, isn’t it?

While there are no easy answers for employers, there are a few things to keep in mind to minimize any downside risk:

• In all cases, cap employees’ hours to avoid the possibility of overtime violations during any period when the Obama rule is in place and the Trump DOL is coming up with a new rule.

• For employers who had already made and carried out changes in anticipation of the Obama-era rule going into effect, stick with those changes and wait to see what happens next. There is little to be gained by reversing those changes right now, and any potential gain could be outweighed by disruptions in the workplace and in employee morale.

• For employers who were ready to carry out changes in order to comply with the Obama rule but had not yet put them into effect at the time the rule was enjoined, keep the changes on hold until there is greater certainty about whether, and when, the new regulations will ever become effective.

• For employers who had not yet done anything, simply keep waiting and seeing what the future brings.

We will continue to keep you apprised of developments in this area as they occur. In the meantime, if you have any questions or would like more information, please contact Paul Derrick at [email protected].

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