The U.S. Department of Labor (DOL) is fighting a court ruling that put new FLSA (Fair Labor Standards Act) overtime regulations on hold. Last month, a district court in Texas issued a nationwide preliminary injunction blocking the DOL’s final rule that sought to raise the required salary level to qualify for white collar exemptions.
Although the DOL now seeks to lift the injunction, the overtime changes that were scheduled to take effect December 1 remain on hold for the time being.
Several possibilities exist as to what will happen next. The DOL could file a motion to stay, or suspend, the injunction during the appeals process. If the court were to grant such a motion, this would cause the rule to take effect. If no motion to stay is filed, or if such a motion is denied, the injunction will stand during the appeals process.
To add a further layer of complication, the DOL filed a motion for an expedited appeal on December 2, which motion was granted on December 8, and the DOL’s opening brief will be due on December 16, 2016. Further, the states’ brief in support of the district court’s injunction will be due on January 17, 2017 and the DOL’s reply brief will be due on January 31, 2017. We will not have a decision on the expedited appeal until sometime in February 2017. While all this plays out, it’s natural to ask: What should businesses be doing?
Here a few things to consider:
- Rapidly assess what actions to take and what actions are possible. Many employers spent months preparing for the FLSA changes, identifying workers affected by the final regulations, and determining whether to increase their salaries to comply or reclassify them as non-exempt employees, and communicating those changes to their employees. If an employer already notified an employee of a salary increase effective December 1 or already made the change, it may be too difficult to reverse that change and communicate that the change won’t occur. You should confer with your counsel and consider whether it’s better to go ahead with your initial plans and stay the course, especially if your payroll team already processed the change.
- Start tracking time now. The court may side with the DOL and the proposed regulations could be reinstated retroactively to the original December 1 effective date. For that reason, employers that decide not to take action to comply with the new regulations while the litigation and appeal are pending should consider directing reclassified employees to track time. This will ensure that, in the event the final rule is later upheld and overtime becomes due retroactively, employers will have an accurate record of hours worked.
- Continue to evaluate the FLSA status of employees. While the rule is delayed, employers should continue to evaluate the FLSA status of their employees by reviewing job duties and descriptions to ensure that employees are properly classified. Whether or not the rule is upheld, employers remain subject to FLSA requirements that dictate proper job classification and payment methods. Take this opportunity to make sure employees’ duties match their job descriptions. Following the recession in 2008, in many workplaces, tasks were redistributed after layoffs and many employees took on additional duties that were never added to into their job descriptions. These employees may need to be reclassified under existing FLSA regulations.
- Be transparent in communicating changes. In deciding how to proceed, employers are strongly advised to consult with internal or external legal counsel and other experts to discuss options available before making and communicating decisions related to this latest development. Employee relations and financial implications should be considered. Employers should also keep in mind that applicable state laws may require advance notice of any changes in pay. State laws may also govern the overtime exempt status of employees. Remember to convey to employees that it’s the law that’s causing potential changes and not your company. Otherwise, morale can be impacted if employees feel they are being demoted by being reclassified.
While we have no crystal ball and cannot predict what a Trump administration will do, one can guess that it might direct the DOL to abandon the appeal, because President-elect Trump previously stated that he thought that small businesses should be exempt from the proposed increases in minimum salary for the white-collar exemptions. The Trump administration might prefer to take a more gradual approach to raising the minimum salary levels, instead of the almost 100 percent increase contemplated by the DOL’s rule, or may prefer no increase at all. So, our advice to employers is to take this time to make sure you’re in compliance with existing wage and hour laws and ensure you have employees classified properly. There’s no time like the present.