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Stay the Course Despite Overtime Injunction, LR Employment Lawyers Advise

3 min read

Local employment lawyers are advising their clients to proceed with any plans they made for implementing change in the U.S. Department of Labor’s overtime rules, even though a federal judge in Texas has issued an injunction preventing the rule from taking effect as planned on Dec. 1.

“This process has been reviewed, and was expected for a long time. So there’s probably been a number of businesses that have already analyzed their jobs and may have already put some of this in place,” said Bruce Cross of the Cross Gunter Witherspoon & Galchus law firm in Little Rock.

Cross said the logical thing for employers, from a management and human resources standpoint, would to be to continue any changes that they already implemented or announced in anticipation of the rule.

Twenty-one states had sued to prevent the DOL from enforcing the rule, which doubled the threshold salary for employees that can be exempt from overtime pay to more than $47,000 a year.

The injunction, issued in the Eastern District of Texas, gives immediate relief from the impending effective date, but “I don’t think by any means it’s a done deal,” said Stuart Jackson, a partner at the law firm Wright Lindsey & Jennings of Little Rock.

Like Cross, Jackson advised businesses to proceed as if the rule were going into effect. He expects the DOL to appeal to the 5th U.S. Circuit Court of Appeals, which could overturn the injunction, a risk for companies that decide to wait and see.

“I’m telling people, if you’ve already planned to make the transition … then go ahead and do it,” he said. “And if something changes and the Court of Appeals upholds the preliminary injunction, you can make a decision then.”

A number of companies have already made salary adjustments for employees in order to comply with the rule, Jackson said.

One of those is Wal-Mart Stores Inc., which in September raised store managers’ salaries to at least $48,500 annually.

The Bentonville retailer said Wednesday that it was reviewing the new court ruling.

“But we don’t anticipate making any changes to what we’ve already shared with our associates,” a Wal-Mart spokesman said in a statement to Arkansas Business.  

The centerpiece of the Department of Labor’s new overtime regulations raised the threshold of what salaried workers must be paid in order to qualify as an exempt employee.

The level has stood at $23,600 a year since 2004, but on Dec. 1, it would have doubled to $47,476. The new rule could award overtime pay to 4.2 million Americans who previously could be exempt, about 50,000 of them in Arkansas.

Michelé Burns, director of the Arkansas Society for Human Resource Management, said her organization had not been opposed to the intent of the new rules — that is, higher pay for employees working more than 40 hours a week. But she praised the injunction because doubling the threshold for overtime exemption was too much all at once for some businesses to absorb.

SHRM wanted to see a more gradual change in the rules, she said.

While Burns was surprised by the injunction, she said many businesses have waited until the last minute to prepare for the rule. Those probably won’t go through with the changes while the injunction is in place, she said.

More worrisome, she said, was that some businesses may have anticipated what the overtime would cost under the new rules and reduced the base pay of affected workers with the expectation that overtime pay would bring them back to approximately the same level that they were being paid as exempt employees.

Burns encouraged those businesses to return workers to their old salaries to avoid demoralizing their employees.

The inauguration in January of a new president may encourage some companies to wait and see whether the rule is scuttled permanently, Cross said. As president, Donald Trump couldn’t simply dismantle the rules “with the stroke of a pen,” Cross said, but his DOL appointments could change the rules in the long run.

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