**Federal Judge Halts Nationwide Overtime Rule Increases, Prompting Employer Decisions**

A federal judge has recently blocked a significant rule that was poised to raise the salary threshold for white-collar overtime exemptions across the United States. Originally set to enhance the threshold in two stages—from $35,000 to $44,000 and then to $59,000—the rule has now been declared an overreach by the U.S. Department of Labor (DOL) due to its steep increases and provisions for automatic adjustments every three years. The judge's ruling not only nullifies the immediate planned increase to $59,000, which was scheduled for January 1, but also rolls back the initial increase that had raised the salary floor to $44,000 in July, reverting it back to approximately $35,000.

This decision is consequential as it affects compensation planning for many employers. Approximately 4 million additional workers were set to gain overtime coverage under these changes. With the phase-two threshold boost now off the table, employers are faced with several strategic decisions moving forward.

Historically, this scenario bears resemblance to a 2016 case under the Obama administration, where an increase in the salary threshold was similarly halted by the courts. The new ruling from the U.S. District Court for the Eastern District of Texas echoed the same sentiment, emphasizing that the duties of employees should predominate over their salary levels in determining exemption status. The judge stated that the DOL does not have the authority to predominantly use a salary-level test to displace the duties test.

Notably, this recent decision was influenced by the Supreme Court's recent stance on "Chevron deference," which previously required courts to defer to agency interpretations in certain circumstances. This change empowers courts to overturn agency rules more readily, reinforcing the judge's ruling against the overtime rule increases.

As of now, while the DOL may appeal the ruling, the incoming Trump administration's stance means that such an appeal might not be aggressively pursued. Historically, the Trump administration has rolled back similar regulations, and it is anticipated that it might take a similar approach in this case.

Employers now must consider how to handle this abrupt change. Those who had already adjusted salaries or reclassified employees in anticipation of the new rules might face challenges if they decide to revert these changes. Additionally, employers need to communicate clearly with their workforce to manage expectations and maintain morale.

In navigating these challenges, employers are advised to consider several critical questions related to their compensation strategies and seek legal counsel if needed. This development underscores the importance of staying informed on regulatory changes and preparing for contingencies as the legal landscape evolves.