Throughout all of 2016, businesses and the Department of Labor prepped for a new overtime law that would have taken effect on December 1st. The main impact of the law was set to be its change to the classification of employees as overtime-exempt. By law, the salary threshold for an employee to be classified as exempt and not be paid overtime is 23,660 dollars. The law would have risen it dramatically to 47,476 dollars.
The law never took effect, though. As the result of a lawsuit brought by several states, an injunction by Judge Amos L. Mazzant, III, of the U.S. District Court for the Eastern District of Texas, Sherman Division came just eight days prior to its taking effect. While the injunction doesn’t block the law, it has stopped it from taking effect so that both sides can have their arguments heard. States are contending that the law places an undue burden on businesses and question whether the Department of Labor can raise the salary threshold by such a large amount. With the law in limbo, employees and employers are all asking what’s next.
No timetable has been set on when a ruling on the law has to be made. As a side effect of this, employers who have prepped for the switch to the new law aren’t sure what to do. If they continue with changes made to accommodate the law, they may be paying their employees more than the FLSA requires. However, if the injunction is lifted and the law is allowed to go into effect, there likely won’t be much turnaround time between the two events. Thus, employers who roll back changes that were made for the law risk not being compliant if the injunction is lifted.
Complicating the battle is the incoming administration. With widespread Republican control throughout the government, the Department of Labor may choose to not defend the law in court. In that case, it would be thrown out regardless of its legality. This makes it even harder for employers to anticipate what they should do, as the decision can truly go either way right now.
This will be an interesting case to see unfold, as the impact will be felt by nearly every employer. For now, the best decision for businesses looks to be a wait-and-see approach. Planned changes to employee salary structure can be put on the back burner, but it’s still far from safe to throw them out.
Stephen Koppekin is the founder and CEO of Koppekin Consulting, Inc.