Federal Overtime Rule Blocked, With Impact on Real Estate

November 23, 2016

A rule slated to take effect Dec. 1 that had the potential to increase labor costs for employers in industries nationwide, including real estate, hit an unexpected roadblock yesterday when a federal court in Texas stopped the regulation from taking effect.

The injunction, by the U.S. District Court for the Eastern District of Texas, said the rule by the U.S. Department of Labor, which would have greatly expanded the number of workers eligible for overtime pay, is “without statutory authority.”

Under the rule, the federal government would have required all salaried employees who are designated as executive, administrative, or professional staff to be paid time-and-a-half for any hours worked over 40 hours per week if they earned less than $47,476, up from $23,660. The overtime rule would have applied to “highly compensated employees” as well if they earn less than $134,004, up from $100,000. In addition, increases in the minimum salary levels would have been updated every three years going forward.

For the real estate industry, although the rule wasn’t expected to have an effect on the compensation of real estate sales associates and brokers who are independent contractors and earn their income through commission sales, it was expected to impact the compensation of salaried employees of brokerages and state and local associations, among other employers in the industry.

As a result of the nationwide injunction, employers in the real estate industry will no longer be legally required to meet the rule’s new overtime thresholds. However, should the federal government appeal the court’s ruling and win, the change could potentially take effect at a later date. That could open the possibility that employees would have a right to back pay for overtime worked after the Dec. 1 effective date. Real estate brokerages should seek legal counsel to determine how to proceed.

More on the ruling is at REATOR.org.

Access the decision at the U.S. District Court's site.

Watch an explainer video from NAR Senior Counsel Lesley Walker.