June of this year we posted about the new overtime rule in the Fair Labor Standards Act (FLSA) that was scheduled to take effect on December 1. The new rule would have impacted more than 4.2 million Americans by raising the exempt salary threshold to $47,476. In a surprise announcement last Tuesday, November 22, 2016, U.S. District Court Judge Amos L. Mazzant granted an order temporarily barring the rule from going into effect on December 1. He found that the 21 plaintiff States (and an additional 50 small business groups ) established standing to have their case heard.
The crux of the rule doubles the salary threshold from $23,660 to $47,476 to determine which salaried workers are eligible for overtime. Employees with salaries less than the new rate of $47,476 (or $913 a week) must be paid time-and-a-half overtime for every hour over 40. If your business isn’t using an employee time tracking system, it may be time to consider one to avoid labor law issues and to control overtime.
The plaintiffs stated that the new OT rule would cause monetary damage by forcing them to substantially increase labor costs. This could affect state services due to budget cuts and layoffs. The States also argued that a plain reading of the FLSA shows that Congress intended the new rule for white collar workers such as, professionals, administrators, outside salespeople and executives. And they claim the Department of Labor exceeded its authority by applying the rule to all classifications of workers based on salary alone.
The judge also struck down the provision that would automatically raise the exemption level every 3 years.
The Department of Labor can appeal the injunction to the U.S. Court of Appeals, or can litigate the issue on its merits. The incoming new administration can also make changes. For now, businesses and state governments can hold tight, and insure that they are in compliance with the existing FLSA requirements. It may also be a good time to evaluate current pay standards in an effort to keep your best employees and utilize a clock in, clock out system to capture accurate employee hours. This will also help control overtime.
Stay tuned and stay in touch by following us on Facebook. We will provide updates as they come.