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Judge blocks rule increasing salary for workers exempt from overtime

Posted By Editor, Thursday, December 15, 2016

Contributed by Karen Davis - Senior Employment Attorney, Vigilant.
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Judge blocks rule increasing salary for workers exempt from overtime 

A federal district court has temporarily blocked a U.S. Department of Labor (DOL) regulation that would have taken effect on December 1, 2016, and raised the minimum salary for workers who are exempt from overtime. The ruling applies nationwide. The judge’s action buys more time for the parties to argue whether the rule should be permanently placed on hold. We don’t know yet how long that will take, but it’s reasonable to expect it will occur after the change in administration on January 20, 2017. The incoming Trump administration could voluntarily withdraw from defending the lawsuit, and thus leave the existing salary levels in place. This is still speculation at this point, though.

Here’s why the court decided to temporarily block the implementation of the DOL’s regulation. The federal Fair Labor Standards Act (FLSA) states that “any employee employed in a bona fide executive, administrative, or professional capacity” is exempt from overtime. Congress focused purely on workers’ duties, and didn’t establish a minimum salary. The DOL came up with the idea of a minimum salary for these exempt “white collar” workers. That salary is currently $455 per week and was scheduled to rise to $913 per week on December 1, 2016. (See our
5/18/16 Alert when the DOL published its new rules.) The court said the DOL exceeded its authority by establishing a salary that was so high that it overrode the “duties” test for the overtime exemption (State of Nevada v. U.S. Dept. of Labor, ED Tex, Nov. 22, 2016).

If an employer has already announced salary increases to employees who otherwise would have lost their exemption from overtime on December 1, 2016, the employer needs to decide how to proceed. If the increases were rolled into performance reviews, merit increases, or promotions, any reduction could create employee relations challenges. Any employer that communicated the increases purely as a legal compliance issue may be in a better position to explain why it won’t be implementing them. However, because workers may have been relying on any announced increases in planning their personal budgets, employers should proceed with caution. Also, keep in mind that any wage reductions cannot be done retroactively; employees must receive the full wage that was in effect at the time they performed the work. Stay tuned to see what happens with these overtime rules. We don’t know for certain what the court’s final ruling will ultimately be, or whether the new administration will continue to defend the lawsuit.

Karen Davis is an employment law attorney with significant experience providing advice and counsel to employers. She works with companies of all sizes, as a staff attorney for an employers' association. Connect with Karen Davis on Linkedin.

 

Tags:  DOL  employee  employment law  HR West 2017  minimum wage  Vigilant 

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