Federal Judge Halts New Overtime Pay Rule

By Sally Wagenmaker and Michael E. Batts, CPA

Temporary Injunction Puts Implementation in Question

A federal judge yesterday issued a nationwide temporary injunction halting the implementation of a new overtime pay rule scheduled to go into effect on December 1, 2016.  The judge, Amos L. Mazzant III – appointed by President Obama – ruled that the Obama administration (specifically, the U.S. Department of Labor) exceeded its legal authority in implementing the new rule.   Consequently, this rule change is on hold for all U.S. employers.  

The rule change would double the minimum threshold salary for employees recognized as "white collar" to be exempt from overtime pay – raising it from $455 per week to $913 per week, as we have reported extensively in prior articles, most recently in our October 31, 2016 blog.  The court case was brought by 21 states, all challenging the legal validity of this increased salary threshold.  

What lies ahead?  The injunction applies until Judge Mazzant issues a full ruling on the validity of the new overtime pay regulations.  Some observers have reported that they believe it is likely that Mazzant will ultimately rule that the new rule is invalid, based on the legal analysis contained in his 20--page order.  Such a decision would be subject to appeal to a higher court by the Obama administration.   But given its lame duck status and the transition to the Trump administration in January of 2017, an appeal by the executive branch seems doubtful.

Employers that have planned to make changes in response to the new overtime pay regulation may thus wait until the rule's future is decisively determined.  They should remain attentive, however, to legal compliance in other still-applicable areas of overtime rules, such as making sure that the job duties necessary to meet the white-collar exemption are satisfied and that currently non-exempt employees are properly paid overtime.  We will provide updates with more information on this critical topic as it becomes available.  

Wagenmaker & Oberly, LLC would like to express gratitude to Mike Batts, CPA, and the accounting firm Batts Morrison Wales & Lee (BMWL), for their contribution and assistance in the editing and distribution of this article. BMWL is a CPA firm dedicated exclusively to serving nonprofit churches, charities, ministries, schools, foundations, and associations across the United States from their national headquarters in Orlando, Florida.  BMWL provides audit and assurance, tax, and strategic advisory services (www.nonprofitcpa.com).