Donald Trump Will Be President, but Employers Must Still Comply with the New Overtime Rule

November 2016

1. Plan to be Fully Compliant by December 1, 2016

Employers should plan to be fully compliant with the New Rule by December 1, 2016. Although President-elect Trump's policies will undoubtedly be different from President Obama's, the New Rule will take effect on December 1, 2016 prior to Trump taking office on January 20, 2017. Therefore, the New Rule will go into affect as planned unless it is first halted by pending litigation or legislation.

2. Pending Litigation: State of Nevada v. Department of Labor

On September 20, 2016, several business groups and 21 states (collectively the "Plaintiffs") sued the Department of Labor (DOL), asking a judge to stop the New Rule from taking effect. The Plaintiffs' consolidated lawsuit, State of Nevada v. U.S. Department of Labor, is pending in the U.S. District Court for the Eastern District of Texas. The Judge deciding the case is Amos Mazzant, III, who was appointed by President Obama in 2014. The Plaintiffs have filed a motion asking the court to enter a preliminary injunction halting the implementation of the New Rule until the merits of the case can be decided – undoubtedly well into 2017. The Plaintiffs' motion was heard on November 16, 2016, and Judge Mazzant promised to provide a ruling by Tuesday, November 22, 2016. Stay tuned.

3. Pending Legislation

On September 28, 2016, Rep. Tim Walberg (R-Michigan) proposed legislation called The Regulatory Relief for Small Businesses, Schools and Nonprofits Act that would delay implementation of the New Rule six months until June 2017. The legislation passed the House with a vote of 246-177, but it still must pass the Senate and avoid the President's veto to become law.

On September 28, 2016, Sen. James Lankford (R-Oklahoma) introduced companion legislation in the Senate to delay the New Rule by six months. The legislation is currently being considered by the Senate Committee on Health, Education, Labor and Pensions.

On July 14, 2016, Rep. Kurt Schrader, (D-Oregon) proposed legislation to phase in the New Rule over four years and eliminate the automatic triennial increase of the exempt salary threshold. This bill has gained some bipartisan support. Senators from five different states have introduced companion legislation that is very similar.

The likelihood that any legislation is enacted before December 1, 2016 is nil. Congress will be in session throughout the end of November, but President Obama has announced he would veto any bill to delay the New Rule. Moreover, because a new Congress will begin in January 2017, all pending legislation in the current Congress would be rendered moot and would have to be reintroduced to be considered. Therefore, the Trump administration and new Congress will address the issue however it is left if they desire to change it.

4. Trump's Take on the New Rule

It is possible that the New Rule may be short lived in Trump's administration, but that remains to be seen. Republicans will have a majority in both the Senate and House in the new Congress. Republicans, including House Speaker Paul Ryan, have already called the New Rule an "absolute disaster". When asked about the New Rule during the campaign, Trump stopped short of saying that it should be completely rescinded. Rather, he suggested that he may exempt small businesses, saying:

We have to address the issues of over-taxation and over-regulation and the lack of access to credit markets to get our small business owners thriving again. Rolling back the overtime regulation is just one example of the many regulations that need to be addressed to do that. We would love to see a delay or a carve-out of sorts for our small business owners.

Given the election results, there is reason to believe the New Rule may change from its current form during Trump's presidency. Perhaps the most likely candidate for reversal is the triennial automatic adjustment to the salary level test, which is not scheduled to have an impact until 2020. But for now, employers should plan on being compliant by December 1, 2016. It will take time for the new Congress or Trump's Department of Labor to take action and change the law if they decide to do so.

Moving forward, employers should be alert for additional updates as the new administration and Congress take office.