Overtime Rules Stall, as Court Slams on the Brakes

Ten days before the start date of sweeping new overtime rules, a U.S. District Court judge slammed on the brakes. The new regulation, which was to go into effect on December 1, has been postponed indefinitely.


The new rules would have required employers to pay their salaried workers overtime pay if the employees’ total annual compensation was under $47,476, or $921 per week. The previous threshold was $23,660 per year, or $455 per week. So, for example, a salaried employee anywhere in the U.S., who makes $40,000 per year, would either have to get a $7,476 (19%) raise by December 1, or begin receiving “time and a half” overtime pay for all hours beyond a 40-hour work week.

The proposed rules would have affected 4.2 million workers, according to the U.S. Department of Labor. At trucking and logistics companies, the overtime rule would apply to salaried employees, including back-office staff, dispatchers, and even some drivers. Sales personnel could also be affected, because the rule’s provisions don’t count all bonuses and commissions toward the employee’s total weekly compensation.

Twenty-one U.S. states filed a lawsuit in September, to stop implementation of the new rules. The states argued that the cost of complying with the new rule would hurt state budgets. That financial impact is the reason why the states, as employers, had legal standing to challenge the regulation in court. The District Court judge issued an injunction on November 22, preventing the rule from going into effect.

According to an article in Fortune, that injunction may cause additional confusion for all employers — but especially for those who have already complied with the new rules. The article describes what comes next:

The preliminary court injunction must first become an official injunction, which will require additional court hearings within the next 60 days, legal experts say. During that process, the Obama administration could decide to appeal the judge’s decision to the U.S. Court of Appeals… [and] an appeals court review could also take months. And while legal experts say they expect the appeals court to uphold the lower court ruling, that can’t be taken as a given.

If the appeals timeline stretches out past January 20, of course, the future of the overtime rule will become the responsibility of the incoming Trump administration. Some pundits speculate that the new administration is unlikely to pursue the appeal.