Obama's Overtime Rules Overturned; Now What?

A federal judge in Texas overturned the President’s executive orders modifying certain administrative rules of the Fair Labor Standards Act that were set to take effect 1 December 2016. What is the impact of this ruling?

To review, the most important change was raising the annual salary an employer had to pay from $23,738, a figure established decades ago and representing about $11.50 per hour (when the minimum wage was $2.65), to double that, $47,476, a salary representing over $23 per hour (still a lower multiple of the $7.25 minimum wage). Pay under the threshold amount, and an employer could not claim the employee as exempt from federal overtime law. It might not be able to for other reasons, but an employer had to pay this annual salary to possibly qualify.

First, as the case stands, the changes are currently unenforceable. For the threshold portion of the changes, that means that an employer could legally consider itself exempt from paying its employee time-and-a-half the hourly rate by paying the lower figure (again keeping in mind many employers who pay an employee at least that much owe overtime for other reasons).

Second, any appeal is unlikely to be decided prior to President Obama’s term expiring. That means it would be the Trump administration (so strange to type that) deciding whether to appeal. This likely would be personally decided by President Trump, who I believe would choose not to appeal. Hence the threshold would remain at a figure that has not been adjusted for inflation for decades.

Three, some employers had already made changes in pay rates and policies not knowing the changes would be nixed. Likely, these employers would not change these pay policies if they are already implemented. So at least these employees would have the benefit of the pay raise President Obama attempted to give Americans. If such new pay policies were not to apply until 1 December 2016 then the employer will likely rescind these given the court ruling.