November 23, 2016 December 1 Implementation of Department of Labor’s New Overtime Rules Indefinitely Delayed
KEEPING YOU INFORMED…
Employers across the nation can breathe a sigh of relief and have something particularly cost-saving to be thankful for this Thanksgiving. Yesterday, a federal judge in Texas granted a motion for an emergency preliminary injunction of the implementation of the largely anticipated new Department of Labor (“DOL”) Fair Labor Standards Act (“FLSA”) regulations. The motion was filed by the 21 States and more than 50 business organizations that sued to block and declare unlawful the DOL’s new overtime rules. This nationwide injunction indefinitely delays the enforcement of the DOL’s new overtime rules unless and until the U.S. Government is able to successfully appeal the Judge’s decision. As of now, there is no definite timeframe indicating when, assuming an appeal is eventually filed, we will have a final decision regarding when/whether the DOL’s new overtime rules will ultimately be enforced/upheld.
These regulations, which were scheduled to go into effect on December 1, 2016, would have, among other significant changes, increased the salary threshold for FLSA exempt employees from $455 per week or $23,660 per year, to $921 per week or $47,892 per year.
In his 20 page decision granting the injunction, the judge explained, among other things, that the “significant increase to the salary level creates essentially a de facto salary-only test,” which is contrary to what Congress had intended when the overtime exemption rules/tests were created. He also noted that there would be a likelihood of irreparable harm suffered by the States if the new rules were implemented and that the DOL did not prove that it would suffer any harm if the implementation of the new rules were delayed pending a final decision by the courts on the pending lawsuit related to the validity of the lawfulness of the new rules.
As a result of this injunction, the existing FLSA overtime rules remain in effect, including for New York employees (i.e., nothing changes). Therefore, employers will, at least for now, be able to continue to consider as FLSA exempt those employees who are paid on a salary basis, earn at least $455 per week/$23,660 per year and satisfy one of the Department of Labor’s “duties tests” (Administrative, Professional, Executive, etc.) for the FLSA overtime pay exemption. FLSA exempt employees will continue to not be entitled to receive overtime compensation for hours worked in excess of 40 in a week.[1] The injunction does not, however, affect any other non-FLSA overtime compensation obligations that may exist in your collective bargaining agreements or other employment agreements.
What remains in question, however, is what will happen if the decision granting the injunction is later reversed on appeal. In a recent similar situation involving another DOL rule, some courts have held that the employer is not liable for the delay in complying with the temporarily suspended rule. Others, though, including a district court in New York, have held the opposite. The New York case is currently on appeal to the Second Circuit Court of Appeals, but a decision has not yet been issued. The decision in that case will likely be dispositive of this pending issue. In the meantime, employers will have to decide whether to take the conservative approach and implement the changes that were supposed to take effect on December 1 or to take advantage of the injunction and continue abiding by the current FLSA rules until a final decision is made.
Understandably, many of you have already begun preparing for the new rules and may have already informed your employees about the changes that were (until yesterday) going into effect on December 1. If so, please contact us before making any additional changes (or undoing them, for that matter) so that we can guide you through how best to proceed with informing your employees and walk you through the other considerations that may impact your next steps.
We will continue to update you regarding any changes or additional information we receive about the status of the suspension of the DOL’s new overtime rules.
If you have questions regarding whether your employees are FLSA exempt, please contact Alyssa Zuckerman at ALZ@lambbarnosky.com, or one of our other attorneys.
THIS MEMORANDUM IS MEANT TO ASSIST IN GENERAL UNDERSTANDING OF THE CURRENT LAW. IT IS NOT TO BE REGARDED AS LEGAL ADVICE. THOSE WITH PARTICULAR QUESTIONS SHOULD SEEK THE ADVICE OF COUNSEL.
[1] Note, the FLSA provides different overtime rules for qualifying police officers and firefighters. Contact us for more information on these rules.
© Lamb & Barnosky, LLP 2016