A GIFT TO EMPLOYERS THE SIZE OF TEXAS (BUT DON'T THROW OUT THAT GIFT RECEIPT)

As an employer, you are aware that the Department of Labor (DOL) had mandated changes in the overtime rules to take place December 1, 2016. Just in time for Thanksgiving, a United States District Court Judge in Texas entered a preliminary injunction that stopped the implementation of the new rules. Before you pop the champagne, you should know that the future remains murky.

Where have we been?

On May 18, 2016, the DOL announced changes to the Fair Labor and Standards Act (FLSA) Overtime Rule. Prior to the changes, so called “white collar” workers were exempt from being paid overtime so long as they earned at least $23,660 per year ($455 per week). Under the new rule, there was no exemption for salaried employees who earn less than $47,476 per year ($913 per week).

Employers of all sizes were required to implement the foregoing changes by December 1, 2016.  Most employers were opting to either increase salaries or reinstate time-clocks to calculate employees’ overtime hours and compensation.

Gordon Law suggested that employers move early to see which of the above options would be least detrimental. We also suggested that you not increase any employees’ salary until the rule actually went into effect.

Where are we now?

On November 22, 2016, as a result of lawsuit filed by twenty-one states (Nevada being the lead state) in Texas, a District Court Judge entered a nationwide injunction preventing the new rule from being implemented.

A preliminary injunction is issued when one side (here the states) is able to show that it has a substantial likelihood of success on the merits, and it would suffer irreparable harm if the injunction is not granted. This is not the end; rather, it may just be the beginning of a very long case.

The Texas judge found that although the DOL could determine which types of duties could be exempt from overtime versus those that were non-exempt, the DOL could not utilize a threshold salary to supplant the established duties test.

Under the so-called duties test, the employee’s primary job function must involve the kind of work associated with exempt executive, administrative or professional employees.

  1. Executive duties are the management of the enterprise or a department and managing two full-time employees;
  2. Administrative duties include the exercise of discretion and independent judgment with respect to matters of significance; and
  3. Professional duties include work that requires advanced knowledge in a field of science or learning that requires invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

Where are we going?

As discussed above, a preliminary injunction is precisely that — preliminary. The matter could continue before the Texas District Court and could result in either a permanent injunction or the judge could be presented with evidence or arguments that could cause him to reverse his position.

Additionally, the Texas District Court’s decision could be appealed to the Fifth Circuit Court of Appeals. However, this is a decision that must be made by the Justice Department. As you are aware, the Justice Department is a part of the Executive Branch of the Federal Government — in other words, the President.  It is unlikely that a Trump Justice Department would have the same appetite to pursue this case as the Obama Justice Department.

What should you do?

If you followed our earlier advice, you have determined whether your employees should be exempt or non-exempt based upon the duties test. This, for all measures, will be the first step.

If you have instituted policies where employees are tracking their time and being paid overtime, you should not stop that. If you increased salaries, you should not now reduce them. If you promised raises, you should carefully consider the impact to your employee morale if you were to not fulfill your promises.

If you did nothing, for the time being, you can continue to do nothing. However, you should be aware that this gift may be taken back as easily as it was given.

 

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