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Federal Judge Stops Overtime Exemption Rule (for now)

Published:  November 23, 2016

Yesterday, in the matter of State of Nevada, et. al. v. United States Department of Labor, et al., a federal judge issued a nationwide temporary injunction stopping the Department of Labor (“DOL”) from implementing new regulations related to overtime exemptions for salaried workers that were to take effect next week, on December 1, 2016.  While the State of Nevada is the lead plaintiff in the case, multiple other states have joined the lawsuit, including:  Michigan, Kentucky, Texas, Alabama, Arizona, Arkansas, Georgia, Indiana, Kansas, Louisiana, Nebraska, Ohio, Oklahoma, South Carolina, Utah, and Wisconsin.  However, the injunction applies to all states nationwide, even those states that are not part of the lawsuit.  The injunction is not a final decision in the case.  Instead, it serves to stop the implementation of the new regulations while the lawsuit is pending. 

The DOL’s new regulations would have changed the salary threshold for the “white collar” exemptions or executive, administrative, and professional exemptions under the Fair Labor Standards Act (“FLSA”). 

Under the FLSA, employers must pay employees minimum wage and overtime for hours worked over 40 in a workweek unless they fit within specific exemptions.  In order to fall within one of the “white collar” exemptions, the employee’s primary job duties must meet the FLSA’s test for exemption, and the employee must be paid a certain minimum salary.  The current salary threshold for exemption is $455 per week or $23,660 per year.  The new regulations would have raised the minimum salaries of exempt workers to $913 per week or $47,476 per year.  They would have also increased the minimum salary for highly compensated employees from $100,000 to $134,004 per year.   

In anticipation of these changes, many employers have already increased salaries and are now left scratching their heads on what to do.  On the one hand, as critics of the rule have pointed out, the salary jump will have a detrimental impact on businesses.  On the other hand, reducing the salaries of employees when an adjustment has already been made carries with it its own challenges.  In weighing your options, bear in mind that the judge's ruling is not permanent; however, given the impending federal administration change in both our executive and legislative branches of government (and the fact that this measure was originally one advanced by President Obama), the future of these proposed regulations may be bleak.  Until a final decision has been reached, employers may continue to adhere to the old exemption rule.

If you have any questions regarding the impact of the nationwide injunction or strategies for handling changes already implemented or planned to be implemented on December 1, 2016, please contact any of the attorneys at Royal, P.C.