What Happened?

In a surprise decision that will bring relief to employers, a federal district court in Texas issued a nationwide preliminary injunction on November 22, 2016, temporarily barring the U.S. Department of Labor (DOL) from implementing its new salary level regulations for the "white collar" executive, administrative and professional overtime exemptions on December 1, 2016, as planned. Ruling on a challenge to the new regulations brought by 21 states, the court agreed with the plaintiffs that the DOL exceeded its authority under the Fair Labor Standards Act (FLSA) by so drastically increasing the minimum annual salary for exempt employees. The court ruled that the extent of the proposed increase in the required annual salary level, from $23,600 to $47,476, supplanted the duties requirement portion of the "white collar" exemption contained in the FLSA by creating "essentially a de facto salary-only test." The court also held that the DOL lacked the authority to implement the automatic salary increase mechanism in the regulations that would have increased the salary level automatically every three years.

What Do Employers Do Now?

Until a final resolution of the lawsuit is reached, employers may continue to follow the existing overtime regulations and, therefore, need not increase the salary of "white collar" exempt employees to $47,476 on December 1, 2016. Employers who have already announced or implemented the salary increase may also roll it back, if they wish, but this may negatively affect employee morale. 

What's Next?

The DOL can appeal the district court's decision to the 5th Circuit Court of Appeals. However, it is unlikely that the appellate court would hear any appeal until after President-elect Trump is inaugurated. It is unclear how the incoming administration will address this issue, but President-elect Trump has in the past stated that the DOL's new overtime requirements are an example of overly burdensome regulations. There also have been attempts in Congress to stop the regulations. As a result, there is the possibility that the new administration will take a different approach toward implementing the new regulations when it assumes office.

What About New York State?

New York employers should remember that New York State has its own minimum salary level for the executive and administrative exemptions which is currently set at $675 per week ($35,100 per year). (New York does not have a minimum salary level for professional employees.) As was reported in our most recent Client Alert, the New York State Department of Labor has proposed increasing the minimum exempt salary level for executive and administrative employees.

In summary, those proposed new minimum salary levels include:

New York City Large Employers (11 or more employees):

  • $825.00 per week on and after 12/ 31/16
  • $975.00 per week on and after 12/31/17
  • $1,125.00 per week on and after 12/31/18

New York City Small Employers (10 or fewer employees):

  • $787.50 per week on and after 12/31/16
  • $900.00 per week on and after 12/31/17
  • $1,012.50 per week on and after 12/31/18
  • $1,125.00 per week on and after 12/31/19

Remainder of Downstate (Nassau, Suffolk and Westchester counties):

  • $750.00 per week on and after 12/31/16
  • $825.00 per week on and after 12/31/17
  • $900.00 per week on and after 12/31/18
  • $975.00 per week on and after 12/31/19
  • $1,050.00 per week on and after 12/31/20
  • $1,125.00 per week on and after 12/31/21

Remainder of the State:

  • $727.50 per week on and after 12/31/16
  • $780.00 per week on and after 12/31/17
  • $832.00 per week on and after 12/31/18
  • $885.00 per week on and after 12/31/19
  • $937.50 per week on and after 12/31/20