In November, a Texas federal district court issued a nationwide injunction temporarily blocking the implementation of the new Fair Labor Standards Act (FLSA) final Overtime Rules (OT Rules). To humbly borrow from Dr. Martin Luther King’s last book, we find ourselves asking, Where Do We Go from Here? Chaos or Community?
A Bit of History and Chaos
In May 2016, the OT Rules were finalized and issued by the United States Department of Labor (DOL). In mid-September, 21 states led by Texas and Nevada filed suit against the DOL and Labor Secretary Thomas E. Perez, attempting to enjoin the implementation of the new white-collar exemption OT Rules. Separately, a consortium of national and local business groups and chambers of commerce also filed their own lawsuit and were joined in the same case. On November 22, 2016, the Honorable Judge Amos L. Mazzant, III of the Eastern District of Texas granted the states’ application for a nationwide injunction.
The district court held that the OT Rules should not be accorded administrative deference because they were contrary to the statutory text of the FLSA and Congressional intent. The court also examined whether the automatic increase mechanism of the OT Rules could exceed the DOL’s authority under the federal Administrative Procedures Act. As part of its reasoned and multistep analysis, the court found the public interest was best served by a temporary injunction. Accordingly, the court issued a preliminary temporary injunction preventing the implementation of the OT Rules and, notably, did so on a nationwide basis –not merely covering the states that filed the lawsuit.
Not surprisingly, on December 1, 2016, the DOL appealed the decision to the Fifth Circuit Court of Appeals and requested an expedited briefing schedule. The Fifth Circuit Court granted the request and actually issued a more expedited briefing schedule. The first brief was due December 16, 2016 and the last reply brief will be due January 31, 2017, with additional briefing deadlines in between the two dates. Oral arguments will be scheduled for the first available date after the briefing is closed.
At the district court level, the business groups’ and chambers’ motion for summary judgment remains pending and could result in an additional ruling by the lower court. Additionally, the impending inauguration of President-Elect Trump leaves many unanswered questions about whether the DOL will continue with the appeal and pursue the full implementation of the OT Rules. To add another layer of complexity, the Texas AFL-CIO recently filed a motion to intervene as a defendant in the pending lawsuit. The Texas AFL-CIO seeks to defend the OT Rules, particularly in the event the new Trump Administration abandons the DOL’s appeal.
What does this mean for our Employer Community?
Needless to say, there are more moving parts in this saga than a three-dimensional chess game from outer space. What does this uncertainty mean for employers?
For some employers, nothing. Many employers did not wait until the last minute to reclassify employees to a nonexempt status or increase salaries for exempt employees to the meet the proposed $47,476 salary threshold. Reversing those changes would prove to be costly from a morale standpoint and could result in a loss of good employees.
Employers who gambled (or procrastinated) should keep plans to comply with the OT Rules on hold while the outcome is pending, just in case.
In the meantime, as the saga continues, employers can take at least two practical steps:
- Make sure all of your employees are properly classified under the FLSA. The salary threshold was merely one test. Employers have to meet two other tests, including: (a) whether employees are performing exempt duties and (b) whether employees are paid on a salary basis free and clear from impermissible pay deductions under the FLSA.
- Make sure you track all hours of work and properly pay overtime for nonexempt employees. If in doubt as to whether an employee should be classified as exempt, audit the job description or seek a legal opinion to determine their status. If not, the safer course is to pay overtime wages. The FLSA still requires that you pay overtime wages to those employees who do not meet the old salary threshold, the exempt duties test or who are not paid on a salary basis.
For the time being, let us see where the chips may fall.Published by Conselium Executive Search, the global leader in compliance search.