Judge Hits Pause on Overtime Rule for Salaried Employees

A rule to extend overtime protections to an estimated 4.2 million salaried workers will not go into effect as planned on Dec. 1, as a federal judge on Tuesday issued a preliminary injunction halting it.

The judgment pauses a Department of Labor (DOL) rule that would have guaranteed overtime pay to salaried workers making $47,476 per year ($913/week) or less. That would have replaced the current rule, which is that workers are exempt from overtime if they make at least $23,660 annually, or $455 per week.

If the injunction were not granted, home care providers would have been forced to begin tracking hours of salaried employees within the rule’s compensation limits and begin paying overtime for hours  beyond 40 within a work-week. Overtime pay is defined as 1.5 times a worker’s regular rate.

Home health organizations spoke out after the final rule came out earlier this year, with the National Association for Home Care & Hospice warning that providers might have to alter their per-visit payments to an hourly system. Cutting caregiver hours to avoid overtime and/or raising workers’ salaries to make them exempt were other potential changes predicted by NAHC.

Some said that because relatively few home health and home care workers are salaried, this “other” labor rule would have little effect on the industry.

But the rule would have compounded labor challenges that home care agencies already are facing, given a separate DOL rule that has taken effect, extending minimum wage and overtime protections to workers who previously were exempt under a “companionship” designation.

A lawsuit to block the December 1 implementation date of the rule governing salaried employees was filed in Texas on behalf of 21 states. Critics of the rule have said it will cause undue administrative burden on businesses and add steep wage costs. Proponents of the overtime rule argue it benefits workers who work more than 40 hours per week.

Judge Amos L. Mazzant III of the Eastern District of Texas concluded that the rule should not go forward, citing several reasons.

The original intent of the overtime rule under the Fair Labor Standards Act (FLSA) is to apply exemptions based on duties rather than strictly on salary levels, and the DOL’s rule change would have placed a sole emphasis on salaries, he wrote. The injunction is appropriate because if the rule takes effect as planned, it could cause “irreparable harm” and could “have a detrimental effect on government services that benefit the public,” particularly for services provided by state agencies with budget constraints.

The injunction applies nationwide, and will be in place until the judge rules on the merits of the case.

At least some believe that Mazzant will go on to strike down the rule on the merits, given his language in granting his injunction, the New York Time reported. Still, companies that already have taken action in anticipation of the rule, such as by raising salaries to avoid paying overtime, may find it impossible to roll back the changes.

A further complication is that the administration of President-elect Donald Trump could take action to strike down or alter the rule. This would be in keeping with his stated intention to roll back regulations, but could run counter to his promises to represent the interests of working class voters, the NYTimes noted.

And some opponents of the rule have said they would be open to a changed version, such one with as a less extreme increase in the salary threshold for overtime.

The DOL “strongly disagrees” with the ruling, according to a statement issued by the agency.

“The department’s overtime rule is the result of a comprehensive, inclusive rulemaking process, and we remain confident in the legality of all aspects of the rule,” the statement reads. “We are currently considering all of our legal options.”

Written by Amy Baxter and Tim Mullaney

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