Employers and employees across the country are closely monitoring developments regarding the suspension of former President Obama’s “Overtime Rule.” In November 2016, a Texas Federal Court judge issued a preliminary injunction against the Overtime Rule, halting its implementation.

The Overtime Rule was an effort by the Obama Administration to help workers. The Rule increased the eligibility threshold for overtime pay exemption from $23,660 to $47,476. According to some estimates, this change would have benefited an estimated 4.2 million workers. On the other hand, the increased overtime pay threshold would have negatively impacted many employers’ bottom lines.

The preliminary injunction temporarily halts the implementation of the Overtime Rule. But perhaps the most pressing question is, “What will happen next?”

Preliminary Injunction

A preliminary injunction is an injunction entered prior to the final merits determination of a legal case. An injunction either halts certain conduct or compels a party to continue said conduct.

Here, the Texas judge’s injunction temporarily halted the Overtime Rule’s implementation. The Overtime Rule was set to go into effect on December 1, 2016, at which time employers were required to be in compliance with the Rule. The injunction permitted employers to ignore the Rule’s requirements. Instead, employers could continue following existing overtime pay rules.

Current Overtime Rules

Businesses and startups in California and across the United States are to follow existing overtime rules until a final determination is rendered on the Obama Administration’s Overtime Rule. Currently, the Federal Labor Standards Act (FLSA) mandates employers to pay their nonexempt employees overtime (calculated as time and one-half) for those hours worked in excess of what is considered to be “full-time.” (Typically, full time is considered to start between 35-40 hours per week.)

The FLSA sets a series of minimum requirements which businesses must follow regarding overtime pay and labor standards. States may further expand on FLSA requirements, setting more stringent requirements. This is why some states have a higher minimum wage.

An example of a more stringent state-enacted overtime requirement can be found right here in California. Under California law, individuals who work more than eight hours in one day are eligible to receive overtime pay. This is true even if they do not work a “full-time” 40 hours over the course of the workweek. Overtime pay increases to double the employee’s normal rate of pay if he or she works more than 12 hours in one day!

What to Expect

Businesses are, without a doubt, in limbo due to the current status of Obama’s Overtime Rule. The injunction is temporary. Businesses may be required to comply with the Overtime Rule if a final ruling is made. This would mean accommodating for increased costs due to the nearly doubled threshold.
Businesses may still have a lifeline. The Overtime Rule is a product of the Obama Administration. The new Administration may either withdraw its support for defending the rule or it may decide against its implementation. California businesses and startups should stay abreast of these developments and should also remain aware of potential changes California may make to its own laws.

- Claire Kalia


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