A federal judge in Texas has granted a nationwide preliminary injunction sought by several business groups and states preventing the U.S. Department of Labor (DOL) from enforcing its new overtime rules, which had been set to go into effect next week. The rules increased the salary threshold for employees to qualify for most of the so-called "white collar exemptions" from the overtime requirements of the Fair Labor Standards Act (FLSA).

The judge's order creates uncertainty for many employers who had already taken steps to comply with the rules. The DOL has not yet announced whether it will seek an immediate appeal of the decision to the Fifth Circuit Court of Appeals or let the case proceed in front of U.S. District Court Judge Amos Mazzant first. Even if the DOL chooses to appeal, there is no timetable at this point for when such an appeal would be heard or resolved. Another complicating factor is the incoming Trump administration, which has not yet taken a position on the issue.

Employers that had planned to reclassify employees solely because of the increase in the salary requirements imposed by the new rules could choose to put these changes on hold pending final adjudication of the rule. However, such employers should be prepared to implement the changes if the injunction is lifted, which could occur with little or no advanced notice. Employers that have already announced planned changes because of the new rules, such as wage increases, may also want to consider the human relations and operational impact of putting their plans on hold.

Many employers also took this opportunity to analyze their exempt/non-exempt classifications under the duties tests for each of the exemptions. Any changes employers planned to make as a result of this analysis are not necessarily tied to the enjoined rule changes and, therefore, employers may opt to proceed with these changes to ensure they are in compliance with existing overtime rules.

Ballard Spahr's Labor and Employment Group routinely assists employers in navigating the FLSA's overtime rules and in preparing for compliance with the new rules if and when it will be required.

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