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By Debbie Cohen

In case you missed it while taking a little break for the Thanksgiving holiday, on November 22, 2016, the United States District Court for the Eastern District of Texas gave employers, business groups, states, and other interested parties the relief they had sought from imminent implementation of the US Department of Labor’s (DOL’s) new overtime rule when it temporarily stopped the new rule from taking effect as scheduled on December 1. As discussed in previous blog posts, the new Fair Labor Standard Act (FLSA) “white collar” overtime rule would have more than doubled the salary threshold for exempt status under the FLSA overtime pay exemption. The rule had been challenged in two lawsuits consolidated before the court. In granting the Plaintiffs’ requested relief, the judge stated, “A preliminary injunction preserves the status quo while the court determines the department’s authority to make the final rule as well as the final rule’s validity.”

The temporary injunction is national in scope, blocking the new overtime rule from going into effect anywhere. In granting the temporary injunction, the judge indicated in his opinion his belief that the Plaintiffs in this case are likely to prevail on the merits. Of course, the DOL is likely to appeal the court’s decision and to continue to pursue its position on the merits in the lower court so the judge’s decision at this point is not final. Nonetheless, it may be a while before another decision is made.

What this means for employers is that, for now, the existing “white collar” overtime rule that has been in place since 2004 will remain in place, including the current lower salary threshold combined with a duties test. In the meantime, employers who were in the process of changing their pay practices in time for the December 1 implementation deadline of the new rule may find themselves between a rock and a hard place wondering whether to continue with pay changes or to revert to past practices. The court’s decision does not require employers who have already reclassified employees or made salary increases in anticipation of compliance with the higher threshold levels of the new rule to revert to the current rule. Employers generally also cannot recoup payments made to employees in anticipation of the required changes. Further, for those employers who have not yet implemented changes, while changes may no longer be legally mandated, at this late date, it may be prudent to consider what communications have already been made to employees, what other employers are doing and whether additional changes to your practices will have employee relations or administrative consequences. For specific questions about your own compliance efforts in light of this new development, consult counsel.

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Potter & Murdock, P.C.’s main office is located in Falls Church, Virginia. The firm’s clients are located in and around the metropolitan D.C. region and throughout North America.

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