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Will Trump trump the new overtime rules?

See update to this post.

I’ve been getting a lot of calls about the effect of the recent presidential election on the fate of the new overtime rules that are set to go into effect on December 1, 2016. People want to know what will happen since Donald Trump appears to have a more favorable position toward business and the new overtime rules are going to make things a bit more difficult for business. My interrogators hope—and some expect—that the new rules will be repealed or modified.

In addition, both private-sector employers and state governments have filed suit in U.S. District Court in Texas to block the implementation of the new rules. Some have speculated the Texas court will issue a temporary restraining order (TRO) on Tuesday, November 29. The TRO, of course, would block implementation of the new overtime rules.

This post explains why I think employers need to be prepared to implement the rules on December 1.

Immediate fate depends more on court decision, than election

The court decision has more to do with the immediate fate of the new rules than the election. That’s because it’s highly unlikely that a Democrat administration is going to back down from implementing one of its goals just because a Republican has been elected to be the next President. In fact, the outgoing administration probably prefers to give employees a taste of what their new paychecks will be—or not be—under a Republican administration. (This isn’t a partisan opinion, just a statement of reality.)

But if the Texas court issues the TRO, then the rules will not go into effect on December 1. Personally, I don’t think that’s likely. The U.S. Department of Labor has previously raised the threshold amount for overtime without any successful legal challenge—although the increase wasn’t quite as drastic as the one announced with the current new overtime rules. So raising the threshold itself will probably be found legal. What’s more debatable is whether the threshold amount can be indexed. And because the first time that indexing would occur is in 2019, that issue does not merit the court issuing a TRO.

Stay tuned for the Texas court’s decision

The Texas court’s decision will be based on legal grounds, not on the likelihood that a new Trump administration will change or repeal the new rules. And the only way to know the fate of the new rules will be to read the court’s decision once it is announced. But if the court does issue a TRO, expect it to be immediately appealed—and therefore the TRO may be stayed or stopped until the appellate court reaches a decision.

So “stay tuned” to the Third Shift Employment Law Blog for the results of the Texas Court’s decision. We’ll let you know as soon as the court publishes its opinion.

What may happen before Trump gets into office

Those prone to wishful thinking might think one of the following might happen:

  1. The U.S. Department of Labor (DOL) may postpone the implementation of the new rule. I just don’t think this is likely because the current administration is committed to this new rule.
  2. The DOL could simply not enforce the new rule. Again, I just don’t think this is likely. But even if the DOL doesn’t investigate and prosecute violations of the rule, that will not stop individuals from potentially using the new rule to sue for back pay at a later date. So even if the DOL announces that it’s not going to enforce the rule, employers will still be taking a risk by not abiding by the rule.
  3. The lame-duck Congress could change the rule. Don’t hold your breath for this one. Even if the Congress passes a bill to change or suspend the rule, that law has to survive a Presidential veto. This idea of raising the minimum wage started with President Obama; it’s very unlikely that he would agree to scrap the idea during the last 6 weeks of his Presidency.

What may happen after Trump gets into office

The new administration may change the rules on its own. (Political power is swinging in favor of at least postponing the implementation of the new rules.) Or the President may sign a law repealing the rules when the new Congress begins. A bill already passed by the U.S. House of Representatives would increase the threshold amount, but would phase it in over several years. (This bill has not gotten any traction in the U.S. Senate, though.)

In other words, the new overtime rules can be repealed or modified in two ways: (1) administrative rule change or (2) Congressional action.

Administrative route

Here’s how the administrative rule change would work. The DOL would have to publish a proposed rule in the Federal Register. There will have to be a period for public comment, potentially as short as 10 days (but usually at least 60). Then the final rule has to be published along with an analysis of the comments about the proposed rule. The new rule can’t take effect until 30 days after publication of the final rule. Assuming that the new administration could publish a proposed rule on the day (January 20) the new President takes office and assuming that the turnaround time for the analysis of the comments on the rule could be done within 24 hours (very unlikely), it would probably be at least 41 days before a repeal or a modified rule could be in place. That means the rule that goes into effect on December 1 would be in operation for more than 3 months (41 days after January 20, which is roughly 3 months after December 1). That potentially gives employees 3 months of increased pay and motivates them to lobby to keep their pay increases.

Congressional route

If Congress passes a law setting the amount of the threshold (potentially including a series of phased-in changes to the threshold), the new rules could be overturned in the amount of time it takes for the bill to be passed by both houses and signed by the new President. Although it’s possible for Congress to move quickly, that is unlikely, especially since the Republicans don’t have the votes to overcome the cloture rules of the U.S. Senate, which currently require 60 affirmative votes (out of 100) to stop debate on a bill. (The Senate can’t vote on a bill until it has stopped debate.) So to even vote on a bill will require the Republicans to convince nine Democrat senators to support cloture, assuming that the 51 Republican senators (in the new Congress) all agree to cloture.

Bottom-line assessment

All this analysis means that the new overtime rules are unlikely to be stopped before they become effective on December 1. So employers need to be prepared to implement the new overtime rules.

New overtimes rules in a nutshell

The new overtime rules don’t change the current Federal (and Alabama) minimum wage of $7.25 an hour. The rules change the threshold amount for exemptions to the minimum wage and the 40-hour workweek. Currently, employees can’t be exempt from overtime unless they are paid at least $455 a week. The new rules set this threshold at $913 a week. This means that, beginning on December 1, any currently exempt employees who don’t get paid at least $913 a week will have to be paid overtime (time and a half) for any hours over 40 that they work during a week. (This is vastly more complicated than this summary indicates.)

More resources about new overtime rules

Items on this web page are general in nature. They cannot—and should not—replace consultation with a competent legal professional. Nothing on this web page should be considered rendering legal advice.

© 2016

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Wednesday, 28 June 2017

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