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Federal Judge Halts FLSA Overtime Rule Changes—for Now

December 28, 2016

A federal judge has temporarily halted the new Fair Labor Standards Act (FLSA) overtime pay regulations that were set to go into effect December 1.

 

In late November, a judge in the Eastern District Court of Texas ruled that the plaintiffs in a lawsuit had satisfied the requirements for a preliminary injunction on FLSA.

 

Had the regulation gone into effect, employers across the United States would have had to make quick adjustments to remain in incompliance with the U.S. Department of Labor’s Final Rule on Overtime Pay. The rule determines which workers in white-collar positions are affected by the minimum wage and overtime laws, as outlined in the FLSA.

 

The following are the rules as they would have been structured beginning December 1:

 

  • Any workers earning less than $913 per week (or $47,476 annually) in a full-time position must get paid the overtime rate for any time they work past the standard 40-hour work week. This approximately doubled the existing threshold.

  • Overtime pay rate is defined as one-and-a-half times the standard hourly rate of one’s position.

  • The threshold for highly compensated employees was raised from $100,000 to $134,004.

  • Automatic updates would occur to these thresholds every three years, starting January 1, 2020.

 

Opposition from the business community

 

These rule changes would have had a significant impact on businesses and organizations nationwide. To comply with the rules, employers would have to use one of three methods to either track their employees’ time or increase their pay:

 

  • Limit all employees to working only 40 hours per week

  • Pay employees time-and-a-half their standard hourly rate if they work any hours over that limit, regardless of how much money they make

  • Increase exempt employees’ salaries so they are above the $47,476 threshold

 

Many business owners argued they simply did not have enough time to prepare for the changes. Groups like the National Association of Manufacturers and the U.S. Chamber of Commerce voiced their opposition to the change. And, 21 states had joined forces to file lawsuits against the DOL over the issue.

 

It is important to note that this recent injunction is not permanent, as the DOL is likely to continue to seek changes to the FLSA rules. The delay created through the injunction could at least help these businesses to get to a point where they can realistically comply with the new rules. However, the mere fact that a judge issued an injunction indicates there is at least a possibility the rules will not go into effect at all.

 

To remain up to date with the FLSA overtime rule changes and to learn more about how they could potentially impact your business if are enacted, meet with a skilled third-party business accounting and planning consultant. 

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