Texas Federal Court Stays Implementation of New FLSA Exemption Rules: Fate of Rules Now In Doubt
A nationwide preliminary injunction now precludes the U.S. Department of Labor (“US DOL”) from implementing its new white collar overtime exemption “Final Rule” that would have significantly increased the current salary threshold for the executive, administrative, and professional exemptions under the federal Fair Labor Standards Act (“FLSA”). On November 22, 2016, a federal district judge in Texas halted these increases, that had been scheduled to take effect on December 1, 2016. Under the US DOL’s Final Rule such white collar employees would have needed to earn at least $913 per week (or $47,476 per year) to be exempt from overtime pay on and after December 1, 2016. The fate of the Final Rule is now uncertain. A US DOL appeal of the Texas federal district court’s decision could result in the injunction being lifted and the Final Rule going into effect immediately. However, the election of Donald J. Trump as President creates more uncertainty as even if the current DOL appeals the injunction and wins, the new administration could withdraw the challenge and permit the injunction to stay in place.
Employers also must be concerned with changes in the wage and hours laws of each state in which they employ workers. For example, recent regulations that the New York State Department of Labor (“NYSDOL”) has proposed, which, if finalized, are scheduled to go into effect on December 31, 2016, will increase the minimum salary thresholds for executive and administrative employees throughout New York State under the wage and
hour provisions of the New York Labor Law (“NYLL”). These proposed amendments, if enacted, will quickly push the minimum salary in New York State for exempt executive and administrative employees above the levels proposed in the federal Final Rule. NYSDOL Wage Orders do not need legislative action and the “comment period” on these proposed amendments will end on December 3, 2016. Moreover, the Texas federal district court injunction does NOT block changes in state wage and hour regulations, such as these proposed amendments in New York. Accordingly, New York employers need to be prepared to raise the salaries of executive and administrative employees if they are to remain exempt from the NYLL’s overtime pay requirements.
Presently the minimum salary threshold for the executive and administrative exemptions under the NYLL is $675 per week ($35,100 per year). While most of the proposed minimum salaries are initially lower than those under the Final Rule, they will rise above the Final Rule for large employers as early as December 31, 2017. If, after the current 45-day public comment period, the NYSDOL publishes the Proposed Wage Orders, employers throughout New York State will need to increase their exempt executive and administrative employees’ salaries by December 31, 2016 and annually thereafter to meet the requirements of the Proposed Wage Orders.
Given the current uncertainty, we recommend that all employers continue to identify which positions would require reclassification if the injunction is lifted and the Final Rule goes into effect. Management should also continue internal planning and preparations should employers need to roll out the reclassifications on relatively short notice. However, we believe that the prudent course is that employers not announce internally any planned reclassifications that are premised only on the new regulations and suspend for now actual reclassifications until the nationwide injunction is lifted, if at all.
For New York employers, if the NYSDOL publishes the Proposed Wage Orders, New York employers will need to increase executive and administrative employees’ compensation on December 31, 2016 to preserve the exempt status of such employees.