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Injunction on Overtime Rule Raises Questions for Employers

Businesses already prepared for the change have a decision to make.
PublicPolicy-blog

A federal district court's decision to grant an injunction on the Department of Labor's new overtime rules, which were set to go into effect on Dec. 1, is "a victory for small-business owners," said Juanita Duggan, president and CEO of the National Federation of Independent Business.

While the NFIB and other groups (the rule was challenged by 21 state governments and more than 50 associations) may be applauding the move, it has created a mess for employers who had already implemented changes to meet the deadline.

For companies that have already done the work, do you revert to the old standard and act as though none of the preparation was done? If so, how do you communicate that to your employees, who were likely already informed of the changes?

Do you continue to move forward with the compliance plans as if the injunction didn't happen? After all, the current injunction is only temporary at this point. If the rule falls through, though, are you prepared to pay more than legally required?

“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,” Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas said in the Nov. 22 ruling.

With President-elect Donald Trump poised to take office in less than two months and Congress debating a series of measures meant to delay or prevent the rules change, a lot of movement around the issue is possible in the next few weeks. The District Court for the Eastern District of Texas could make a final ruling, making the injunction permanent or releasing it. Or an appeals court could reverse the decision.

With all the unknowns the injunction adds to the mix, employment law firm Fisher Phillips suggests: "If you have already made alterations to your compensation plans or to your employees’ exemption status, it might be unpopular to reverse course now. Although you may have the legal right to revert to the status quo depending on your circumstances, you might consider waiting until a final decision is reached in court, Congress and the White House before doing anything further."

If your company was waiting until Dec. 1 to implement the changes, you can choose to delay that pending further rulings, Fisher Phillips notes, but "you might consider communicating to your workforce the expected changes are going to be delayed" because of the ruling.

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