Human Resources News & Insights

OT rule injunction: 5 things you may not (but should) know about it

Ever since a federal court judge in Texas issued an injunction, which froze the implementation of the DOL’s new overtime rule, info has come to light that employers — especially those who’ll wait to implement payroll changes until the smoke clears — need to know. 

Here are five things employers must keep in mind following the injunction:

1. The rule could still be enforced retroactive to Dec. 1, 2016

This certainly isn’t what employers waiting to implement payroll changes until the legal battle pays itself out want to hear: If the injunction of the rule is ultimately vacated, there is a chance the rule could be enforced retroactive to December 1.

The court could change its injunction ruling after further proceedings, or the ruling could be overturned on appeal. If either of those scenarios plays out, the regulations could proceed with the December 1 implementation date in place.

That means employers could be liable for any overtime worked by employees that would’ve been reclassified as non-exempt had the injunction never been issued in the first place.

As a result, employers will want to seriously consider tracking the hours of any employees who may be reclassified if the DOL’s rule is put in place — just in case the data is needed later.

2. State notice requirements still apply

If you’re one of the companies planning to roll back changes to payroll as a result of the injunction, remember state notice requirements still apply.

Some states require employers to provide workers with advance notice of changes in their pay. Such laws tend to require a one pay period heads up for changes — and usually for reductions in pay.

Even if you sent those notices prior to payroll changes made in advance of the rule’s original December 1 implementation date, new notices must be issued if those changes will now be rolled back.

3. You don’t have to revert back to the old rule

Employers are under no legal obligation to revert back to the old salary threshold for their employee classifications if they’ve already reclassified some employees as non-exempt in anticipation of the December 1 compliance deadline.

You can roll back any changes you made, as long as employee classifications still abide by the previous FLSA overtime exemption rule, but you’ll obviously have to take into account the impact this would have on employee morale and your administrative resources.

4. Inconsistent pay adjustments could be fertile ground for discrimination claims

Employers need to be careful about taking half measures when making adjustments to employees’ pay in the wake of the injunction. Any changes should be consistently applied across the entire workforce.

Example: Let’s say you’ve already bumped up some employees’ pay to push them over the $47,476 salary threshold, and some of those employees got pay increases of $1,000+, while others only got a few hundred extra bucks. If you decide to roll back the larger salary increases while keeping some of the small increases in place, it could look like a discriminatory move if those keeping the higher salaries tend to be the same age, race, gender, etc.

In other words, beware of making changes for some but not all employees who stand to be affected by the rule.

5. There is still breath in the rule

The DOL’s overtime rule may be been dealt a severe blow, but it still has some life.

Many legal experts are predicting that the injunction was a death sentence for the rule, but there is a lot that still has to play out. If the DOL acts quickly to file an emergency motion for a stay of the injunction — and the stay is granted — the rule is back on.

Also, while all signs point to the incoming Trump administration pulling the resources needed to defend the rule from the DOL, the Trump camp has been anything but predictable so far.

So while the rule certainly has an uphill battle to implementation, employers have to stay ready for anything at this point. After all, few thought the injunction would ever be issued in the first place.

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