Federal Overtime Final Rule Blocked
On Tuesday, November 22, Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas granted a preliminary injunction blocking the Department of Labor's (DOL's) new federal overtime rule, which would have raised the Fair Labor Standards Act's (FLSA's) salary threshold for exemption from overtime pay from $23,660 to $47,476.
As a result of this ruling, unless there is an appeal and immediate ruling, the new salary threshold will NOT go into effect on December 1 (contrary to what was previously reported in various media outlets, including MCN).
So, what does this all mean—both for the regulations in general and your nonprofit? Veena Iyer, attorney with the Minneapolis law firm Nilan Johnson Lewis, addresses two critical questions on the minds of nonprofits:
What is likely to happen next?
- The DOL under the current administration will almost certainly appeal this decision to the Fifth Circuit Court of Appeals. The Fifth Circuit could stay the district court's decision while it hears the appeal (essentially allowing the new rule to go into effect while the court adjudicates the appeal). We think a stay is unlikely, especially because of the difficulties that could arise from forcing employers to comply with the new rule and then invalidating it.
- Whoever loses at the Fifth Circuit would have the option of seeking review from the U.S. Supreme Court, which is unlikely to hear the appeal until a new administration is in place. Significantly, the DOL does not need to maintain its position from administration to administration (and there are indications that the new administration is opposed to the new rule). In other words, the DOL under a new administration could decide to fight for the new regulations or abandon them.
What are your nonprofit's options?
- If your organization was due to increase the salaries of exempt employees or reclassify them to non-exempt status only because they did not meet the new salary threshold, you no longer are required by law to do so at this time.
- In the process of coming into compliance with the new regulations, many of our clients found that certain exempt employees also did not meet the duties tests for the "white collar" exemptions. The Texas court's decision does not affect the duties tests. If an exempt employee did not meet the duties test before this decision, s/he does not meet it now and should be reclassified.
As is the case with other regulatory issues affecting employment relations, nonprofits with further questions should consult an employment law attorney.
As do many of our peers and allies, the Minnesota Council of Nonprofits believes the original practices of time sheets and compensated overtime in the now-suspended overtime regulations to be in line with best sector practices. It is our belief that nonprofits should strive to advance their missions, while at the same time providing compensation that will allow employees to provide adequately for their families. This should not require uncompensated overtime from moderate-wage employees. The ongoing debate of this issue underscores the need to correctly categorize and compensate nonprofit staff members, regardless of future rulings.
MCN will continue to monitor developments closely, weighing in where necessary, and will keep you apprised of future developments impacting your nonprofits as we learn of them.