FLSA Overtime Regulations: New Legal Development

Author: Chase Samples, Attorney at Jackson Lewis.

Next week, on December 1, the new overtime regulations were scheduled to take effect.  These new regulations would have, among other things, increased the salary requirement for white collar workers from $455 per week up to $913 per week.  Such a change would have had a disproportionate impact on jobs in the retail, hospitality, and non-profit sectors.  But, not any longer.

In a late effort to block implementation of the new regulations, 21 states, the U.S. Chamber of Commerce, and numerous other industry groups filed a federal lawsuit in Texas, seeking to stop the new regulations.  On Tuesday, a federal judge issued a nationwide injunction, enjoining the Department of Labor from enforcing the new regulations.  Technically, this ruling means that employers do not have to increase the salary threshold to $913 per week to maintain exempt status.  There is the possibility that the decision could be appealed, but, it is unlikely that the appeal would be decided before the Trump administration takes office and the new administration’s labor department is unlikely to pursue this appeal.   So, technically, employers have been granted a huge reprieve and are now off the hook.

The real challenge with this midnight ruling is how to deal with it from a business perspective and an employee relations perspective.  Many employers have planned ahead for this regulatory change and have already notified affected employees of changes in pay.  It is going to be difficult from an employee relations’ perspective to un-ring the bell, especially for those that were expecting a pay raise in the coming weeks.  On the other hand, the message will be more readily received by those salaried employees who were being converted to hourly.   Some employers may have already begun paying employees under the anticipated pay system and for those employers, rescinding pay raises poses particular challenges.

In addition, many employers discovered through this process that some of their salaried employees did not actually satisfy the duties test and had been misclassified.  This was a great time to fix those misclassification problems and convert those employees to non-exempt status.  We continue to recommend that, for those employees who do not satisfy any of the duties’ tests, now is still a good time to reclassify those employees.

 

What should you do?

• First, companies must decide whether to keep the planned overtime pay changes or continue paying employees as they were paid prior to the new regulations.

• Second, if a company is making changes, they should consider whether employees have already been advised of pending changes based on the new regulations.  If employees have not yet been notified, then there’s nothing more to do.  Employers can continue current pay practices.

• Third, if employees have been notified of the anticipated overtime pay changes, then an employer has some difficult decisions to make about whether and how to communicate this latest legal development to employees.  In doing so, employers must be careful to comply with state wage payment and notice laws.  In South Carolina, this means providing employees at least 7 days advance notice of any changes in pay, other than pay raises.

If you have questions or would like to discuss this new development further, please contact, Chase Samples, attorney at Jackson Lewis.  (864) 672-8034 or chase.samples@jacksonlewis.com