Employers, workers and HR are surely wondering where the surprising Nov. 22 court decision halting implementation of the Department of Labor’s (DOL’s) federal overtime rule leaves them and their efforts.
The final rule, set to go into effect on December 1, would have doubled the Fair Labor Standards Act’s annual salary threshold for exemption from overtime pay from $23,660 up to $47,476 and would have automatically adjusted the threshold every three years beginning in 2020.
However, just days before the rule was scheduled to take effect, a federal judge in the Eastern District of Texas issued a preliminary injunction blocking implementation.
The hold is temporary and an ultimate resolution of the issue will depend on the district court’s final judgement on the case, whether or not the DOL appeals the court’s decision and most importantly, what the incoming Trump administration decides to do—eliminate the rule entirely or modify it.
So what should HR do in the meantime?
Legally, nothing is required of employers at this point. First, understand that nothing has changed regarding the existing Fair Labor Standards Act (FLSA) exempt salary threshold and changes emanating from the final rule do not have to be in place by December 1.
Those employers that have already raised salaries above the exempt threshold, or reclassified exempt employees as nonexempt will have to make an important business calculation whether or not to leave the changes made in place. There are no requirements prohibiting employers from rescinding salary increases or exemption statuses provided in preparation of the rule, but the impact to morale of such a decision should be considered. Take note that if a contract was created to include the salary increase, it should be followed. Also, if employers do decide to reverse any changes they have already implemented, they cannot recoup overtime wages already paid.
On the other hand, employers are not legally obligated to revert back to strictly meeting the current rule’s provisions if changes have already been made. They would have to consider the costs to employee morale and administrative expenses incurred to roll back the changes.
New York employers will need to consider pending state regulations increasing the salary threshold for the overtime exempt classification under New York state law. Depending on the size and location of the employer within the state, the proposed incremental increases would reach up to as much as $1,125 per week over the next few years, exceeding the amount under the FLSA. The New York proposed regulations are open for public comment until Dec. 3, 2016.
However employers decide to move forward, HR should devise a clear communications strategy and even designate someone to be the point person on the issue to answer questions from employees and managers. For assistance or questions surrounding FLSA regulations, or with the development of a communications strategy contact CJC Human Resource Services.