On May 18, 2016, the Obama administration announced the Department of Labor’s final changes to the Fair Labor Standards Act (FLSA) updating overtime regulations for non-exempt workers. These changes would have resulted in 4.2 million additional workers becoming exempt. The pay threshold at which white collar workers are exempt from overtime pay was doubled to $47,476 from its original $23,660. This threshold had not been updated in years, but the new rules required the threshold to automatically adjust every three years starting in 2020.
Emergency Motion for Preliminary Injunction
On November 22, 2016, ten days before the new rules went into effect, U.S. Federal Judge Mazzant in Texas issued a nationwide preliminary injunction barring the DOL from moving forward with the new overtime rule. This temporary measure stops the rule until the court has a chance to review the merits of the case objecting to the revisions to the regulation.
The case against the DOL claims that the agency abused its authority by:
- Raising the salary threshold too high without taking into account the “duties test” as originally intended by the law
- Approving automatic adjustments to the threshold every three years
The distinction of “exempt” vs. “non-exempt” is meant to be based on the duties performed by the employee. The duties of an exempt employee are supposed to be executive, administrative, or professional in nature – the typical duties of a “white collar” worker. The new FLSA rules will set the salary sufficiently high to have more employees be exempt without having to scrutinize their duties. Essentially, the objections to the rule change say that this rule of exempt vs. non-exempt was meant to be based on the duties they perform, not the salary they earn.
What does this mean for employers?
Most companies have already either raised exempt employees’ salaries to meet the new threshold or reclassified employees who are still earning less to nonexempt status. However, until a final decision is reached, they are allowed to continue following the existing rule.
It would be difficult to take back any salary increases that were communicated to employees. However, it is easier to hold off on reclassifying exempt employees. This is not a final decision and definitely could still be implemented down the road, so employers should be prepared to have to implement the changes they prepared for. However, many believe that the rule will be facing an uphill battle.
Many believe this injunction will help protect countless business owners, nonprofits, sheriffs, mayors, and county judges from increased costs and forced layoffs. Many businesses expressed concerns about how they would continue to operate if the rule took effect.
The DOL responded in a statement that they “strongly disagree” with the decision by the court, and that they are “delaying a fair day’s pay for a long day’s work for millions of hardworking Americans.” They are currently considering their legal options.