Employers and employees throughout the United States were significantly impacted yesterday following the issuance of a nationwide preliminary injunction entered by the U.S. District Court for the Eastern District of Texas. But for the Court’s ruling, which held that the Department of Labor exceeded the authority delegated to it by Congress in making changes to the overtime requirements of the Fair Labor Standards Act (“FLSA”), new regulations modifying the long-standing overtime requirements were set to go into effect, after approximately two years of public comment, consideration and advance notice, on December 1, 2016. Today, many employees and employers, who have spent months working to address the impact the changes would have, are left asking, what do we do now?
By way of background, the FLSA applies to most employers and, indirectly, employees throughout our country. It sets the floor or minimum wage that must be paid to employees and dictates when employers are required to pay overtime to employees. An exception to such overtime requirement, however, has long existed for administrative employees paid a set salary in excess of $23,600.00 per year. Under the new rules, the minimum salary to avoid overtime requirements would have risen to $47,476.00 per year. To ensure compliance with the looming rule change, responsible and proactive employers were forced to examine the salaries of previously exempt employees. Some employees were given raises to keep workers over the threshold and maintain their exempt status. Others were converted into hourly employees, thus triggering the FLSA’s recordkeeping obligations and overtime pay when applicable. With the start day for the rule change on hold (at least for now), what is an employer to do?
For employers, options include:
- Acting as if yesterday’s injunction was not issued. Having spent months evaluating employees, educating employees about the changes, and implementing the changes in exemption status and wages, many employers will not want to invest (again) the time, the expense of constant payroll changes, and the risk confusion or ill-will from their employees by reverting back to the old exemption and salary status of their workers, particularly since the litigation over the FLSA change is far from settled.
- Reverting back to the “old” exemption and salary status of workers. For those employers that do revert back to the exemption and salary status utilized prior the anticipated December 1 change, advance, written notice to impacted employees must be given in order to ensure compliance with the North Carolina Wage and Hour Act. Employers should be aware that, employees who were given a raise to maintain their status as exempt are not likely to be pleased about a reduction in their salary. In addition, under this option, employers should be cognizant that, if the Court’s injunction is lifted or the litigation challenging the changes is ultimately unsuccessful, employers will again be required to evaluate the salary and exemption status of workers, potentially raise the wages of employees to maintain exempt status, and transition others to back hourly status.
Regardless of the option chosen, clear communications with employees are essential!
Employers unsure as to which option is best should consult with employment counsel, who can help them determine the best option for their particular business and ensure compliance their with other applicable employment laws.