Confusion reigns as new overtime rule is placed in limbo

Maryland employers and workers have reason to be confused about an anticipated expansion of eligibility for overtime pay.  In May, the U.S. Department of Labor issued a regulation that would have doubled (to $47,476) the salary threshold at which many workers have a right to receive time-and-a-half pay, for workweeks that exceed 40 hours.  The rule also would have indexed to inflation future increases in this threshold.  The rule was to have taken effect on December 1, but a few days ago a U.S. District Court judge in Texas issued an injunction barring the rule’s implementation, holding that the Department of Labor may have exceeded its authority in issuing the rule.

The court’s ruling was handed down as Congressional leaders were giving consideration to adjourning earlier than Congress otherwise would have, to preserve the incoming Republican Congress’ ability to legislatively block the new rule in January 2017.  Under the Congressional Review Act, adjourning the current Congress early would stop the clock for legislative review until the new Congress convenes.  Congress might still go forward with this blocking action in January, despite the Texas court’s injunction, since the injunction could prove to be temporary.  In addition, Congressional action would have a nation-wide effect, while the impact of court action could eventually become regionally fractured if some federal Circuit Courts continue to block the regulation, while other Circuits uphold the regulation (should Congress fail to act in January).  As long as the ninth seat on the Supreme Court remains vacant, anticipated splits between the Circuit Courts of Appeal on this issue would remain in place, if Congress does not legislatively block the regulation.

Many employers have already informed their employees of pay increases that would take categories of their workers above the regulation’s $47,476 threshold.  This new threshold now no longer is legally binding – as long as the Texas injunction remains in place, and/or if Congress blocks the rule in January – yet employers fear an adverse impact on employee morale should they rescind previously-awarded pay increases.  On the other hand, honoring previously-announced increases that are no longer necessary in order to keep an employee under the applicable salary threshold would mean incurring salary costs that are not legally required.