Injunction issued on the Department of Labor’s Overtime Final Rule


Injunction issued on the Department of Labor’s Overtime Final Rule

On November 22, 2016, a U.S. District Court judge in Texas granted an injunction which enjoined the Department of Labor from implementing and enforcing the Overtime Final Rule set to take effect on December 1, 2016.

Earlier this year, the Department of Labor’s Final Rule for overtime regulations, which automatically extends overtime pay protections to over 4 million workers within the first year of implementation, was announced by President Obama and Secretary of Labor Thomas E. Perez.

The Final Rule, as stated on the Department of Labor’s website, focuses primarily on executive, administrative and professional workers to be exempt. Specifically, the Final Rule:

  • Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census region, currently the South ($913 per week, $47,476 annually for a full-time worker);
  • Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and
  • Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.

Additionally, the Final Rule amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

With the injunction having taken place this week, employers will have a temporary halt on the implementation of the Final Rule. Many companies have been scrambling to implement the changes needed to comply with the Final Rule’s regulations. The preliminary injunction issued by the court preserves the status quo. For now, employers should continue adhering to current regulations and their own state’s wage and hour laws.

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