Alert: Federal Court Issues Stay On Overtime Changes

After months of planning and preparing, you were prepared to adjust the wages and put into place new systems in response to the new overtime laws.  Perhaps you have already implemented those changes in advance of the December 1 effective date.  And then along came Texas…

On November 22, a federal judge in Texas issued a nationwide stay on the new overtime laws.  A “stay” is a court order blocking parties from taking certain actions.  In this case, the court is preventing the Department of Labor from both implementing and enforcing its new overtime regulations.  What this means is that employers may continue to operate under the old rules while the court determines whether the Department of Labor has the authority to adopt the new rules.

What does this mean for you?  It leaves you with a few options:

  1. If you have not yet implemented or announced a new plan, or if you were not making any changes, you can continue to operate under your current pay structure and all exemptions will be the same as they have been.
  2. If you have announced (but not yet implemented) a new plan, you can choose to either implement the plan even though the regulations are on hold or you can choose to delay the plan given this hold.
  3. If you have already implemented a new plan, you can continue with the plan or it may be possible to revert to your old pay structure. Employees would have to be paid the higher salary for any work already performed under a new structure.  You would also need to review the policies or any agreements put into place to make sure you do not have any contractual obligations that would prevent you from changing the wages back to their earlier levels.

A downward adjustment can be difficult for employees to accept, particularly as they may have already planned on a new or higher salary.  If you are lowering wages or delaying a promised increase, then it is important to discuss with the employee why you are taking the action and assure the employee that it is not a reflection on their worth to the company. Employees may not understand how you were able to pay the increase yesterday, but cannot (or, potentially in their eyes, are not willing to) pay that increase today. You may need to explain to them that the adjustments were being made to comply with the legal requirements, not due to the reality of or a sudden increase in business or profits. Given the new change in the laws, the increase is being delayed and a pay rate being put into place that is more sustainable for the company and reflective of your business.

It is important to note that this stay is temporary.  The court has not yet issued its final ruling on whether the regulations are enforceable, it is just holding the status quo while it figures that issue out.  It is possible that the regulations may never go into effect or they could go into effect sometime next year.  If you decide to delay implementing new pay structures, make certain to follow the law and be prepared to implement those structures if needed when a final ruling is issued.


Tami Z. Hannon