A few months ago, Friend, Hudak & Harris posted an article about new regulations under the FLSA (the “Final Rule”) that changed the rules related to the “white collar exemption.”
The white collar exemption exempts many employees from the overtime requirements imposed by the FLSA. To review that article, please click here.
The Final Rule was to become effective December 1, 2016 and would have significantly limited the scope of the exemption, extending overtime eligibility to an estimated 4 million Americans by requiring employers to pay time-and-a-half to their employees who worked more than 40 hours in a given week and earned less than $47,476 a year. The current threshold is $23,600 a year. The Final Rule also provided for triennial adjustments to the new earnings threshold.
On November 22, 2016 a federal judge blocked the implementation of the Final Rule by granting a motion for a nationwide preliminary injunction filed by twenty-one states and joined by over fifty business organizations. The plaintiffs’ underlying legal argument to defeat the Final Rule is that the US Department of Labor (DOL) exceeded its authority by raising the salary threshold too high and by providing for automatic adjustments to the threshold every three years.
To secure the temporary preliminary injunction, the plaintiffs argued, among other things, that the Final Rule would cause extreme financial hardship increasing government costs substantially and forcing businesses to pay millions in additional salaries, probably leading to layoffs. The judge agreed.
The DOL is not pleased. It issued a statement saying: “We strongly disagree with the decision by the court, which has the effect of delaying a fair day’s pay for a long day’s work for millions of hardworking Americans. The department’s overtime rule is the result of a comprehensive, inclusive rulemaking process, and we remain confident in the legality of all aspects of the rule. We are currently considering all of our legal options.”
For now, the Final Rule will not take effect on December 1, 2016, but it could still be implemented later, after the court considers the plaintiffs’ underlying legal argument. Employers shouldn’t assume that the Final Rule will be permanently barred and should still have a future compliance plan in place.