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Compliance Bulletin: Overtime Rule Blocked by Federal Court

The Department of Labor’s Final Overtime Rule was scheduled to become effective on December 1, 2016. However, this rule has been blocked by Federal Court until further notice.

What is the Overtime Rule?

The Fair Labor Standards Act (FLSA) establishes minimum wage and overtime pay protections for many workers in the United States. However, some employees are exempt from these provisions. The Final Overtime Rule sought to change the parameters outlining which employees could be exempt from the rule.

Why was the rule blocked?

Some business groups challenged the rule stating the change was too drastic and that it would impose a financial hardship to employers. A federal judge in Texas granted an emergency injunction to block the implementation. In addition, the judge ruled that the injunction would be effective nationwide, even though the lawsuit against the rule was only brought in a few states.

Looking ahead

Although many employers had already prepared for the rule by planning to pay overtime or raising salaries above the threshold so employees would remain exempt, the injunction means they no longer have to implement their plans effective December 1, 2016. Employers who failed to plan or were not aware of the rule are no longer at risk of being penalized for not following it. It is unclear whether this rule will be implemented at a later date, modified, or completely scrapped during a new presidential administration.

Failure to pay employees appropriately and in accordance with the FLSA can open an employer up to wage and hour lawsuits. In addition, misclassifying employees as exempt from overtime pay is an ongoing issue that should still be dealt with to avoid violating any current FLSA regulations. If you’re concerned about the status of your employees, KRA can help.

For more information, you can read this compliance bulletin prepared by our content partner, Zywave. If you have questions about how to properly classify employees or your insurance coverage against wage and hour claims, please contact us.

All insurance policies are different. Be sure to review your insurance policy for specific information about coverages available to you. Nothing in this post is meant to suggest a guarantee of coverage.