New injunction impacts recent overtime pay rules

The Federal Department of Labor earlier this year issued a set of rules that would dramatically change how overtime pay is handled for employees.

But on Nov. 22, the U.S. District Court for the Eastern District of Texas issued a nationwide injunction that – for now – serves to indefinitely delay those rules. So what were those proposed rules, and how does this delay affect you and your business – if at all?

First of all, these rules only apply to “employees,” so the majority of real estate salespeople probably wouldn’t have been affected. But a brokerage would be affected if it employs unlicensed staff or licensees who work on a salary or hourly basis instead of commission. And it’s also likely that employees of local Realtor® associations would be covered. Be sure to check with your accountant and/or attorney before deciding whether or not you think the overtime rules apply – you might be surprised.

As for the proposed rules, the biggest change would be to increase the salary threshold for employees who are not subject to overtime (“exempt” employees). Under the current federal rules, any employee whose job responsibilities meets certain standards and who earns more than $23,660 per year is exempt from the overtime pay requirements. Under the proposed rules, the minimum salary would increase to $47,476 per year, and be adjusted every three years. Basically, a manager whose job meets the basic criteria and who earns a salary of less than $47,476 would either have to start tracking his or her time and get overtime for anything more than 40 hours a week, or get a salary bump over the threshold amount.

Since the original compliance deadline was Dec. 1, 2016, some businesses have already made changes to their employment policies by reclassifying employees or increasing wages. While the injunction means that these changes are not technically required at this point, it may not be easy to reverse them while the case plays out in court (“Sorry Bob, but the injunction means we’re cutting back your pay next week!”). Aside from talking through any changes with your attorney and/or accountant, you’d have to consider the overall impact those actions may have on employee morale.

Unfortunately, the best answer to “What does the injunction mean?” is “We just don’t know.” It’s early yet, so it is unclear as to whether any of the proposed changes will be adopted at all, or whether there will be some other sort of amendment to the rules. In the meantime, keep in touch with your professional advisers and stay tuned.