It continues to be a season of surprises
in American politics . . . and in employment law. Who would ever have thought that a federal
judge, appointed by President Obama, would throw a money wrench in a key
initiative of the Obama Department of Labor?
Not me. As I incorrectly
predicted in my November
18, 2016 article, I fully expected U.S. District Judge Amos L. Mazzant III to shoot down an injunction aimed at
blocking the December 1, 2016 implementation of the DOL’s Final Rule, bumping
the minimum salary level for white collar exemptions under the Fair Labor
Standards Act ("FLSA") from $23,660 annually ($455 per week) to
$47,476 annually ($913 per week).
What instead happened was that Judge
Mazzant entered a nationwide preliminary injunction on November 22, 2016, blocking
for now the U.S. Department of Labor (“DOL”) from implementing significant
changes to the overtime rules applicable to white collar employees. The ruling out of the U.S. District Court for
the Eastern District of Texas held that the DOL most likely exceeded its
authority by doubling the salary requirement, which would have rendered
essentially meaningless the duties test, which is actually written into the
FLSA.
The issuance of an
injunction means that implementation and enforcement of the Final Rule by the
DOL is just on hold until further notice by the Court. The DOL has not yet announced whether it
intends to appeal the ruling, and it remains to be seen if the Trump
administration would have any interest in trying to implement a Rule so
unpopular within the business community.
Another potential option might be a revised Rule that would include a
smaller increase in the minimum salary requirement.
What I think I did get correct was my observation that “[i]f the unlikely actually happens, I expect an enormous
sigh of relief from many employers, tinged with annoyance and aggravation over
six months spent preparing for a rule that never went into effect.” Annoyance aside, what should employers do at
this point?
In expectation of the
December 1, 2016 deadline, many employers had bumped employee salaries to meet
the new requirement, and many more had simply adjusted hour wages and work
schedules in an effort to reduce overtime or keep actual wages approximately
the same. As reported in the Wall
Street Journal, businesses are now faced with the difficult decision of
either walking back pay increases they had already put in place, resulting in
angry employees, or eating the expense of changes made in anticipation of a now
uncertain requirement.
There is no right or wrong
answer, and employers will have to look at a number of factors in making their
decision for their particular business.
These factors include, but are not limited to: (1) whether the employer has already
begun implementation of salary/exemption changes, (2) whether the employer has
already communicated planned salary increases or changes even if it hasn’t
actually put them in place, (3) whether the changes impact or potentially
impact the company’s benefit plans, (4) the overall economic impact of the
change to the client, (5) the workforce morale issues that may be implicated,
(6) the temporary nature of the injunction and the fact that it could be
appealed and, if so, potentially reversed on appeal. This is an odd situation where those
employers who planned ahead are faced with more issues than those companies
that procrastinated and did nothing.
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