On November 22, 2016, a federal district court in Texas granted a nationwide preliminary injunction enjoining the implementation and enforcement of the Department of Labor's ("DOL's") new overtime regulations that were set to go into effect on December 1, 2016. The new regulations, among other things, increased the salary threshold applicable to the bona fide executive, administrative, and professional employee overtime exemptions ("white collar exemptions") from $23,660 to $47,476. The court held that the new regulations exceed the DOL's authority by transitioning the white collar exemption test from a duties-based test to a salary-based test, and by mandating a three-year automatic updating of the minimum salary level applicable to the exemptions. The court's decision is temporary in nature, and places the new regulations on hold pending a final injunction hearing.
The court's decision specifically enjoins implementation of the new salary threshold for application of the white collar exemptions as well as the three-year automatic update of the salary threshold. In this regard, the court's decision leaves in place for the time being the $23,660 minimum salary applicable to the white collar exemptions. The decision does not expressly enjoin the DOL's new regulations with respect to its increase in the annual compensation level of "highly compensated" employees exemption from $100,000 to $134,004. Additionally, state and local wage and hour laws are not affected by the court's decision.
It is safe to say that the future regarding the enforcement of the DOL's new regulations is unclear. The court's temporary stay of enforcement is subject to a final injunction hearing, and subject to an immediate appeal to the Fifth Circuit by the DOL. The coming change of administrations further clouds the future of the DOL regs. The Trump administration may elect not to pursue an appeal, and may adopt new regulations overriding the regulations that were set to go into effect December 1. The overtime regulations may also be subject to legislative action that, at a minimum, would alter the new regulations.
The uncertainty regarding the DOL's new overtime regulations leaves employers with the difficult task of planning for the future. Almost all employers find themselves in one of the following situations: 1) they have announced and implemented changes to comply with the new regulations; 2) they have announced but have not yet implemented changes to achieve compliance with the new regulations; or 3) they have not announced or made any changes to address the new regulations. Each of these scenarios presents its own difficult questions for employers. Employers may want to rescind pay-increases and undo changes in classifications that had been implemented or announced. Employers are cautioned to be mindful of employee-relations concerns associated with such changes, and any changes should be analyzed on a case-by-case basis, particularly in light of the temporary nature of the injunction at this time. It is very difficult for employers to "un-ring the bell" after changes have been announced. Employers who have yet to make any adjustments to comply with the DOL's new regulations should be mindful that the injunction is only temporary at this point, and they should begin developing a plan for compliance in the event the injunction is lifted.
All employers should be aware that whatever course they elect to take, employees are likely just as frustrated by the uncertain circumstances and may become disgruntled, especially if a pay-increase is implemented or announced and then rescinded. Disgruntled employees are more likely to contact the DOL, which may trigger unanticipated litigation, or an audit by the DOL. It is important that, regardless of what happens with the new regulations, employers make a good-faith effort to properly classify all employees and comply with all other requirements of the Fair Labor Standards Act.
The court's decision coupled by the political landscape certainly creates difficult questions for employers. Our attorneys are fully familiar with the difficulties created by this uncertainty, and are available to provide guidance and discuss potential next steps