A federal district court has temporarily blocked a U.S. Department of Labor (DOL) regulation that would have taken effect on December 1, 2016, and raised the minimum salary for workers who are exempt from overtime. The ruling applies nationwide. The judge’s action buys more time for the parties to argue whether the rule should be permanently placed on hold. We don’t know yet how long that will take, but it’s reasonable to expect it will occur after the change in administration on January 20, 2017. The incoming Trump administration could voluntarily withdraw from defending the lawsuit, and thus leave the existing salary levels in place. This is still speculation at this point, though.
Here’s why the court decided to temporarily block the implementation of the DOL’s regulation. The federal Fair Labor Standards Act (FLSA) states that “any employee employed in a bona fide executive, administrative, or professional capacity” is exempt from overtime. Congress focused purely on workers’ duties, and didn’t establish a minimum salary. The DOL came up with the idea of a minimum salary for these exempt “white collar” workers. That salary is currently $455 per week and was scheduled to rise to $913 per week on December 1, 2016. (See our 5/18/16 Alert when the DOL published its new rules.) The court said the DOL exceeded its authority by establishing a salary that was so high that it overrode the “duties” test for the overtime exemption (State of Nevada v. U.S. Dept. of Labor, ED Tex, Nov. 22, 2016).
Tips: If you’ve already announced salary increases to your employees who otherwise would have lost their exemption from overtime on December 1, 2016, you’ll need to decide how to proceed. If the increases were rolled into performance reviews, merit increases, or promotions, any reduction could create employee relations challenges. For any increases that were communicated purely as a legal compliance issue, you may be in a better position to explain why you won’t be implementing them. However, because employees may have been relying on any announced increases in planning their personal budgets, you should proceed with caution. Also, we don’t know for certain what the court’s final ruling will ultimately be, or whether the new administration will continue to defend the lawsuit. Contact your Vigilant employment attorney for help in developing an appropriate strategy if the court’s ruling is causing you to rethink the salary levels of your exempt white-collar workers. We will keep members informed of any new developments.