A U.S. District Judge issued a preliminary injunction last month, preventing the new overtime law from going into effect on December 1st as planned. The rule would have affected over 4 million Americans.
The new Labor Department rule would require employers to pay time and a half to employees who work more than 40 hours per week and earn less than $47,476.
It also would have clarified which employees would be entitled to overtime, strengthened protections for salaried workers who are already entitled to overtime, and provided for an automatic update to the salary threshold for overtime every three years.
Employers and local governments sued, charging that the rule would have led to significant increases in businesses’ expenditures and would have been expensive to enforce.
Although the rule is blocked for the time being, employers must continue to comply with the existing overtime threshold, which states that employers must pay overtime to workers who earn $455 a week or less ($23,660 per year). The duties test for administrative, professional and executive employees remains unchanged. Workers who qualified for overtime in the past will retain their overtime protection.
Many pundits theorize that if the rule had been enacted, some employers would cut workers’ hours rather than choose to pay additional overtime. Other employers with workers whose salaries were near the new threshold might opt to give one-time raises to send earnings over the threshold to eliminate an obligation to pay overtime.
The Wall Street Journal reports that some employers are raising salaries anyway, despite the current block. Some say that preparing for the rule to take effect pushed them to make more efficient use of current staff.
Incoming President Donald Trump has promised to roll back Executive Orders enacted under President Obama. With a Republican Senate and House, it is unlikely that new overtime protections will be enacted. However, employers should continue to keep tabs on the rules to ensure that they are in compliance with legal obligations.
