AN INJUNCTION HAS BEEN ISSUED ON THE DOL’S NEW OVERTIME RULE
Did you know that on November 22, 2016, federal district court Judge Amos Mazzant from the Eastern District of Texas granted a preliminary nationwide injunction that temporarily blocks the United States Department of Labor (DOL) from enforcing its revised overtime law regulations on the white-collar exemptions to the Fair Labor Standards Act (FLSA)? This new federal regulation would have raised the Fair Labor Standards Act’s (FLSA’s) salary threshold for exemption from overtime pay from $23,660 to $47,476. For now, Mazzant says that this “… preliminary injunction preserves the status quo while the court determines the department’s authority to make the final rule as well as the final rule’s validity.”
This injunction was so “hot off the press” and unexpected that in my quest to verify the information on November 23, 2016, I found that the DOL were unaware of the injunction and so I was referred to the Legislative Library who was also unaware of the injunction however, referred me the State of Texas Law Library where I was able to verify and confirm the information. Please note that this injunction is not permanent but is only a temporary injunction. This is a great opportunity to run scenarios to implement ‘if and when’ the injunction is lifted. This temporary injunction prevents the regulations from going into effect on December 1, 2016. A “final” decision will be made at a later date based on the actual merits of the case, so changes in the FLSA salary threshold for exemption may be back.
So you may be asking yourself, “What does this all mean and how does it impact me?” So here are some things you may want to consider. First, the deadline of December 1, 2016 to implement the proposed overtime rule is no longer valid and therefore is not actionable. Second, do not disregard because the injunction is only temporary so be sure to stay abreast of how this issue develops and for any guidance. The rule may still be implemented at a later date. Third, be aware that the DOL possesses the right to challenge the decision and has stated that it is looking at all legal options. Lastly, if your organization has already increased exempt employees’ salaries to comply with the DOL’s updated rule, be careful on how you communicate the next steps. The
Society for Human Resources Management (SHRM) reported that attorney Alfred Robinson, Jr. of the Ogletree Deakins law firm in Washington, D.C. and former acting administrator of the DOL’s Wage and Hour Division stated that “employers will likely want to leave decisions in place if they have already provided salary increases to employees in order to maintain their exempt status…it would be difficult to take that back.” However, if there were exempt employees who were in the process of being reclassified to nonexempt, Attorney Robinson suggested that employers may want to postpone those decisions until the litigation is over and a final decision is made.
The Society for Human Resources reports that Gerald Hathaway, an attorney with Drinker Biddle & Reath in New York City stated “If an employer is in a position to [reverse] changes scheduled to take effect next week, it can do so with some confidence, solely on the basis of this decision,” and … those employers can send a communication to employees indicating the changes were made based on the regulation taking effect Dec. 1, but the changes will be re-evaluated as further legal developments occur.”
Further, SHRM reports that Attorney Michael Arnold with Mintz Levin in New York City, explained that “Employers have no legal obligation to unwind the changes,” … They will have to consider what costs they will incur if they do roll back the changes, including cost to employee morale and the administrative expenses. If those potential costs outweigh the possible labor-cost savings, employers may want to think twice before reversing.” He also noted that any higher wages already paid cannot be taken back.
There is no steadfast rule which fits every industry and every situation. In industries with tight profit margins, such as the retail and restaurant industries, employers may be at a labor cost disadvantage and find themselves less competitive if they implement the rule early or before the final decision. Other industries may find that their competition have implemented the rule which may sway decisions made by top talent. Each company must weigh the pros and cons when planning to move forward.
In closing, it is important that employers plan on how to restructure their workforce in the future, if necessary, and not accept this temporary injunction as permanent but for now you can exhale. Be careful on how you classify your employees; be sure to follow the federal rules on exempt vs nonexempt classifications. I urge you to please be mindful of how this change is communicated in an effort to retain your talent and to stay within the guidelines of compliance and labor laws. Also, if upward adjustments were made to salaries, you may want to consult with your HR Department or HR professional about how to best handle the aftermath with your employees. As always, if you need to speak to us, we are here!
To find the court order on Case 4:16-cv-00731-ALM Document 60 Filed 11/22/16 in its entirety go to: http://www.txed.uscourts.gov/page1.shtml?location=notable, then click on State of Nevada, et al vs United States Department of Labor, et al.
For helpful information on what to do next visit this article: https://www.shrm.org/ResourcesAndTools/legal-and-compliance/employment-law/Pages/What-to-Do-Now-that-Federal-Overtime-Rule-Is-Blocked.aspx?utm_source=Facebook&utm_medium=ads&utm_campaign=BPI-FB-PPLA-FLSAContent_2016
Nicole Bellow, *DBA, MBA, SPHR, SHRP-SCP
Sr. HR Consultant
Smarter HR Solutions 713-999-1205