In a ruling announced yesterday, a federal judge in Texas has halted nationwide the effectiveness of the new salary level required to be paid by employers to those employees who are exempt from overtime. This alert will discuss briefly the ruling, its impact, and what employers should do in response.

As you will recall, the Department of Labor (DOL) announced an increase in the salary level for employees treated as exempt from overtime from the current salary level of $455 per week to $913 per week. The new salary level was scheduled to take effect December 1, 2016. In a case in Texas, several states and business groups claimed that the new salary level went beyond the DOL’s authority, and they asked the Court to stop the new regulations from going into effect. Yesterday, Judge Amos L. Mazzant, United States District Court Judge for the Eastern District of Texas, agreed and halted implementation of the new federal overtime rules, at least temporarily, until the Court has an opportunity to consider whether the regulations were properly adopted.

A few questions emerge:

Does this mean the new salary level will never go into effect?

  • No, but the ruling does halt their effectiveness until further action is taken by this Court or the injunction is overturned on an appeal.
  • The DOL is currently considering whether to appeal.

What should employers do if they have already raised exempt employees’ salaries to meet the new threshold or reclassified employees to non-exempt status?

  • This ruling is not easily susceptible to “one-size-fits-all” guidance, and we would encourage consulting with your employment counsel.
  • However, if employers have already implemented salary increases to meet the new salary level, we believe it would be wise to keep those increases in place. It would be difficult to retract those increases.
  • If employers have already announced salary increases but have not yet implemented them, we believe employers should consider whether to postpone implementing those increases pending further action in the lawsuit.
  • Similarly, if employers have already implemented reclassifications, we believe employers may wish to keep those reclassifications in place, especially given that the ruling is only a temporary halt of the new regulations. It may be more disruptive to attempt to “undo” those reclassifications, especially if the new regulations ultimately are implemented.
  • If employers have announced a planned reclassification but have not yet implemented them, we believe employers should consider whether to postpone those planned reclassifications until a later date, and again, pending further action in the lawsuit.

We certainly welcome the opportunity to discuss your particular circumstance and tailor an appropriate response for your situation.