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November 30, 2016

Suspension of the Department of Labor's Overtime Rule

By: Chris Arndt

If you weren’t quite ready for the new Fair Labor Standards Act (FLSA) rule regarding overtime pay, then Christmas may have come early! On November 22, a federal judge issued a nationwide injunction on the Department of Labor’s (DOL) new Overtime Regulation set to take effect on December 1, 2016 stating that the new rule exceeds the agency’s authority.

Employees that earn up to $47,476 would have been eligible for overtime pay. Read more on the details of the new rule here. For now, however, you can ignore the December 1 effective date as the overtime exemption threshold will remain at $23,660 until further notice.

However, you are not off the hook completely.

Understandably, the timing of the injunction is not ideal as many businesses are likely prepared to make the change or have already made salary adjustments with the new regulation in mind. An injunction is only temporary and at this stage it is unclear what will happen with the DOL challenging, stating that it is, “confident in the legality of all aspects of the rule.”

Be prepared that if the injunction is reversed, the FLSA rules could come into effect retroactively. In order to be as prepared as possible, your options are as follows:

  1. Continue with the planned changes you have set in motion and honor the new exemption threshold of $47,476; or
  2. Continue to use the exemption threshold of $23,660 with plans to adjust if and/or when the new rule comes into effect.

Finally, it is best to include the following in your strategy, regardless of the outcome:

  1. Communicate with your employees regarding the injunction and your plans; and
  2. Pay close attention to the ruling and results.

For more on the injunction, contact Chris Arndt at carndt@orba.com, or call him at 312.670.7444. Visit ORBA.com to learn more about our Accounting and Advisory Services.