Federal Court Stops OT Rule

Published Wednesday, November 23, 2016

On November 22, 2016, a federal district court judge in Texas ruled that the Department of Labor’s (DOL) new Overtime Rule should be stopped.

The ruling means that the rule WILL NOT go into effect on December 1, 2016 and that all clubs may keep their employees at their current salary and schedule without the concern of additional payroll expense.

This ruling will be in effect until a final decision on the merits of this lawsuit is reached.

While DOL may wish to appeal this injunction, the fact remains it will be extremely difficult for the U.S. Court of Appeals for the Fifth Circuit to hear that appeal within the next 18 days. Additionally, the Fifth Circuit is traditionally very conservative and DOL would have a hard time convincing it to overturn this ruling.

In its decision, the court ruled that the new salary threshold would effectively remove the exemption from overtime pay for many employees who meet the duties tests found in DOL’s White Collar Exemptions. Thus, this rule functioned to strip out the duties test and replace it with a salary test for the purposes of determining who is exempt from overtime, which was not the intent of Congress.

Though this is a tremendous victory for the club industry, many of you have already begun instituting changes at your clubs in anticipation of the 12/1 implementation date. NCA recommends that you advise all employees as follows: Because of the decision by a federal court, employee pay and work schedules will remain in effect as they were at the beginning of the year until this case is resolved.

Please note that with the chances of an appeal being limited and with the Trump Administration desiring changes to this rule, it is expected that this rule will not go into effect as it is currently constituted. However, there could be some change in the minimum weekly salary threshold proposed in 2017. As such, club leaders should be prepared for additional discussions with their staff if and when that happens.

For now, the good news is that there will be no impact to your club’s bottom line because of DOL’s current Overtime Rule. Should there be an appeal of this decision and should DOL be successful, NCA will advise you of the next steps to take.

Until then, have a wonderful Thanksgiving and should you have any questions about this decision or how it will affect your club, please contact NCA’s Vice President of Government Relations and General Counsel Brad Steele at 202-822-9822 or at steele@nationalclub.org.

Thank you for being a part of NCA!

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