Removing Barriers Blog

Federal Court Issues Injunction on DOL Overtime Rule Set to Go into Effect Dec. 1
Posted November 23, 2016 by CUNA Advocacy

A federal district court in Texas in the case Nevada v. U.S. Department of Labor, U.S. District Court for the Eastern District of Texas, granted an emergency preliminary injunction stopping the Department of Labor (DOL) from enforcing its rule for overtime pay, which was set to go into effect on December 1. The injunction is effective nationwide and will remain in effect pending further order of the court.   

Credit unions have expressed concerns that the regulatory burdens associated with this rule, and potential negative unintended consequences even for the employees the rule intends to help, outweigh the good intention of the rule. 

Small credit unions and those in rural and underserved areas are particularly harmed by this rule. About 35% of all credit unions have no employees making salaries over the DOL’s threshold, and approximately 46% of all credit union CEOs work at credit unions with $20 million or less in total assets. In certain areas, and at credit unions with smaller asset sizes, even CEOs can make below the threshold or approximately $50,000. 

The DOL will very likely appeal this decision. However, it is also likely President-elect Trump will appoint a new Labor Secretary in 2017, and the appeal could potentially be dropped eventually.  

While many credit unions have already made changes to come into compliance with the rule, a court decision or legislation modifying the rule could help relieve the compliance challenge of having to continue to make changes every three years. 

The final rule currently requires employers to automatically update the salary level every three years, maintaining the standard salary level at the 40th percentile of full-time salaried workers in the lowest-wage Census region, and the HCE total annual compensation level at the 90th percentile of full-time salaried workers nationally. 

CUNA wrote to both the DOL and NCUA to seek relief for credit unions who we believe are disproportionately impacted by this rule. We've also shared our concerns with the Small Business Administration’s Office of Advocacy. Additionally, we supported legislation and sent letters to Congress seeking reforms to this rule.