As we are aware, the Fair Labor Standards Act (FLSA) salary threshold for exemption from overtime was being raised to $47,476 annually, as December 1, 2016. Then, on November 22nd, only one week prior to the deadline, a federal district court granted a preliminary (temporary) injunction that blocked (postponed) the ruling, preserving the status quo of $23,660 annually - the argument being that the Department of Labor (DOL) exceeded its authority by doubling the threshold and taking too much emphasis away from the duties test. Then, yesterday (December 1, 2016) the DOL appealed the decision.
Many of our clients are asking how they stay compliant: follow the old or new guidelines?
Unless the court grants a motion for an expedited hearing or a motion for a stay, we’re advising our clients that it remains their choice to follow the old or new guidelines, because without an expedited hearing, we’re looking at months before we’ll see a final ruling. Specifically, anticipate it being after inauguration day, and it is noteworthy that President-elect Trump has expressed that he does not support the entire rule.
So while it remains the employer’s choice, employers who have announced employee raises or eligibility for overtime compensation should strongly consider honoring those plans. Remember that the duties test has not changed, and regardless of the court’s final decision, employees must be properly categorized as exempt or nonexempt. However, for those impacted by the increased salary threshold, any plans you have communicated (ie: informed an employee of a raise in pay) over the past several months likely created a contractual obligation that should be honored, and so it’s not just a moral issue or a matter of what is least disruptive to the workplace.
As with all successful change management initiatives, open and honest communication with your workforce is best. Take this opportunity to remind your workforce that you have an open door policy, and encourage communication. Make sure your workforce fully understands that the salary threshold was set to increase on December 1st, then what occurred on November 22nd and on December 1st. Reiterate that you take your ethical and legal obligations seriously, and at all times will take appropriate steps to remain compliant and do what is best for business continuity, all employees, and the ongoing success & profitability of the company itself – and that these variables are not mutually exclusive.
Disclosure: The content of this blog is provided for informational use only, and is in no way intended to constitute legal advice.