FLSA Overtime Rule Creative Business Resources As some of you might have already heard, a federal judge in Texas issued a nationwide, preliminary injunction temporarily blocking implementation of the new FLSA rule on overtime pay. Therefore, the December 1 deadline no longer applies, and employers may continue to follow the existing overtime regulations until further notice.
Enacted in May 2016 under the Fair Labor Standards Act (FLSA), the proposed rule would have extended overtime pay to an estimated 4.2 million additional workers by drastically raising the salary threshold used to determine exempt status. Currently, workers earning up to $23,660 per year are considered non-exempt, and therefore eligible for time-and-a-half pay when they work more than 40 hours in a week. The new rule would have more than doubled this salary amount to $47,476 and provided for automatic increases every three years. For months, opponents of the rule have expressed concern that it would impose a crushing burden on employers, particularly small businesses and nonprofit organizations.
The surprise November 22 ruling from Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas is the result of two consolidated lawsuits—one on behalf of 21 states and the other on behalf of the U.S. Chamber of Commerce and 50 other business groups—against the Department of Labor (DOL). The plaintiffs claimed that the DOL did not have the authority to so aggressively raise the salary threshold for overtime pay.
Judge Mazzant noted that the preliminary injunction will “preserve the status quo while the court determines the department’s authority to make the final rule as well as the final rule’s validity.” His decision was based on the notion that the new salary threshold would effectively supplant the FLSA’s duties test, which exempts executive, administrative, and professional employees from overtime protections. The authority to take such an action would rest with Congress, rather than the DOL.
The DOL is likely to challenge the injunction, and the future of this expansive rule currently remains uncertain. Although employers may continue to comply with the existing overtime pay regulations, they should prepare for the possibility—however slim—that the controversial rule will be implemented in the future.
In anticipation of the sweeping changes that would have occurred under the proposed rule, many employers have already either raised employees’ salaries so they may retain exempt status under the new threshold, or reclassified employees as non-exempt if they still earn less. Employers that have offered salary increases will likely want to leave those decisions intact, as it would be difficult—albeit legally permissible—to revoke them. Many employers also took the issuance of the new rule as an opportunity to address misclassification issues. In that case, employers should continue with the changes to non-exempt status in order to be in compliance.
Please contact us if you have any questions about this change.
(Sources: https://www.shrm.org/resourcesandtools/legal-and-compliance/employment-law/pages/judge-blocks-flsa-overtime-rule.aspx, https://www.shrm.org/ResourcesAndTools/legal-and-compliance/employment-law/pages/overtime-lawsuits-consolidated.aspx).