A federal judge has blocked the Department of Labor from implementing and enforcing a final rule that would have raised the minimum salary required to be classified as exempt from overtime under the Fair Labor Standards Act (FLSA). This means the rule has been delayed and will not go into effect on December 1, 2016 as expected. Instead, the minimum salary required for the administrative, professional, and executive exemptions will remain at $455 per week pending a final decision in the case.
On May 18, 2016, the Department of Labor published a final rule that, among other things, would have raised the minimum salary for the administrative, professional and executive exemptions from $455 per week to $913 per week. The minimum salary increase was scheduled to take effect December 1, 2016.
On November 22, 2016, a United States District Court Judge in Texas granted a request by 21 states and several business groups to temporarily block the rule from taking effect. Therefore, the minimum salary for the administrative, professional, and executive exemptions will remain at $455 per week at least temporarily.
The delay is temporary while the case continues to be litigated and the court determines whether the DOL had the authority to make the FLSA changes and whether they are valid. The delay applies to employers nationwide.
The court’s preliminary ruling delays the effective date of the FLSA changes until the court makes a final decision. Therefore, the rule did not go into effect on December 1, 2016, but the final rule could still become effective in the future. Employers should watch for updates on the case as it makes its way through the court process and continue to check the Department of Labor website for further updates.
On December 1, 2016, the Department of Labor filed a notice of appeal with the federal court. Pending the outcome of that appeal, the preliminary injunction remains in place.
If you have employees properly classified as exempt under the existing regulations (they meet all of the exemption tests, including the performance of applicable job duties and the current salary threshold of $455/week), you have the option of not making any changes. While this may be an option, there is also some risk that the rule could become effective in the future and be applied retroactively. For this reason, while the case is still being litigated, consider tracking the hours of employees who stay classified as exempt but who will have a salary that falls below $913 per week (or limit their hours to 40 or fewer per week). Consult your legal counsel to discuss your options.
If you’ve already notified an employee of a salary increase or reclassification effective December 1 or have already made the change, it may be too difficult to reverse that change or communicate that the change will not be made. For example, there may be employee relations implications if a salary increase were reversed. As mentioned above, there is also some risk that the rule could become effective in the future and be applied retroactively. If you do decide to reverse a salary increase or delay implementing one already announced, consider tracking the exempt employee’s hours (or limiting their hours to 40 or fewer per week) in case the rule becomes effective in the future and is applied retroactively. Additionally, keep in mind that applicable state laws may require advance notice of any changes in pay and state laws may also govern the overtime exempt status of employees. Employers should consult their legal counsel to discuss options available before making and communicating decisions related to this latest development.
WFB LEGAL CONSULTING, INC.–A BEST ASSET PROTECTION Services Group
LAWYER for BUSINESS