The U.S. District Court for the Eastern District of Texas granted a temporary injunction blocking the DOL’s new overtime rule nationwide.
What does this temporary injunction mean for employers?
It means that, at least for now, employers are not required to comply with the new rule. However, if an employer has already put the rules into practice, it should be cautious about undoing them. First, the injunction is not final or permanent and doesn’t require employers to revert back to the previous rule if changes have been made. There is a chance that the injunction won’t become permanent or that the DOL will be successful on appeal. However, the DOL under a Trump administration very likely will take a different approach than the Obama DOL. It seems at this point that the scales are tipped toward scrapping the new rule, but employers should still be prepared to implement the new rule if necessary. Second, undoing salary increases is problematic, from a morale perspective and, perhaps, from a legal perspective. On this last point, some cities have notice requirements for changes in pay. Seattle’s wage theft ordinance requires advanced written notice of any changes in pay. In addition, depending on how the salary increases were communicated, an employee could argue that the employer created an employment contract and reducing the salary breached the contracts terms. Therefore, if salaries are going to be decreased, it is prudent to consider these risks. When it comes to employees who were converted to non-exempt status, employers should weigh the options of converting them back (as long as they are exempt under the FLSA and state law) or keeping them as non-exempt and paying overtime when necessary. You can also ask your employees in this situation to weigh in, which may ease the whiplash that all of us are feeling.