Is the New US Overtime Rule Still Going to Happen?

Is the New US Overtime Rule Still Going to Happen?

The results of last Tuesday’s election in the US has created a great deal of uncertainty about how employment regulations and other policy issues of concern to employers may change in the coming year when president-elect Donald Trump enters the White House. One issue many employers are wondering about is the highly controversial change in overtime rules announced by the Labor Department earlier this year, which will raise the salary threshold at which employees are exempt from overtime pay from $23,660 to $47,476 starting December 1.

Numerous states and business groups have sued to block or delay implementation of the new rule, but despite a federal judge’s decision last month to merge the two separate lawsuits in order to speed the process up, they may not be decided by the time the rule comes into effect. In the meantime, compensation professionals have been working overtime, as it were, getting ready for the new rule, which will require organizations to more closely manage the hours of newly nonexempt employees or raise their salaries, like Walmart did last month, to clear the new threshold.

Now that the incoming administration is likely to take a very different approach to employment policy, many employers are wondering about the fate of regulations enacted by federal agencies under the Obama administration, many of which Trump has pledged to remove. The overtime rule is the most salient of these, though Trump did not have much to say about it on the campaign trail. Unfortunately for those who’d like the new rule to go away entirely, SHRM’s Allen Smith informs us that it will most likely still come into effect as scheduled, and will be difficult to repeal:

“Absent an intervening injunction before Dec. 1, much of the damage will be done by the time Mr. Trump takes office,” said Robert Boonin, an attorney with Dykema in Detroit. … The Trump administration could direct the Department of Labor to withdraw the rule, which would require notice-and-comment rulemaking, noted Jeffrey Brecher, an attorney with Jackson Lewis in the firm’s Long Island, N.Y., office. …

Although Trump and Congress could act swiftly together to limit the rule’s impact, “The notice-and comment process would take many months, if not years, so employers shouldn’t expect immediate relief from the rule. They should instead continue their plans for complying with the new rule,” [Ryan Glasgow, an attorney with Hunton & Williams in Richmond, Virginia,] said.

A judge heard arguments on Wednesday on whether to enjoin the rule, and hopes to issue a ruling on Tuesday, November 22. We will keep our readers updated on the outcome of that case.

The bottom line is that the overtime threshold is going up no matter what; the question is one of delaying the increase rather than canceling it. Legislation introduced recently to amend the rule would either delay the rule by six months or implement it gradually over the next three to four years. These bills would also eliminate the rule’s provision to raise the threshold automatically every three years. While President Barack Obama would likely veto any such changes if Congress were to pass them before his term ends, a Trump administration would likely be more receptive to them.

Then again, Smith adds, “Trump’s rollback of the rule isn’t a given”:

Jim Swartz, an attorney with Polsinelli in Atlanta, said, “Given his relatively tepid reaction to the rule when questioned on the campaign trail, it is hard to imagine that Trump is willing to sacrifice political capital to roll back a rule that may well help many of his supporters.”

Additionally, even if the Trump administration does decide to scale down the overtime expansion, it will be a difficult change to reverse without hurting the engagement of those employees who stand to make more money with the new rule in effect. Ben Penn at Bloomberg BNA notes that President Obama was deliberate about making sure the rule became active before he left office, so that rescinding it would require telling the 4.2 million employees who just became eligible for overtime that, in fact, they aren’t.