Employment Law Alert – November 2016

Temporary Injunction Puts Hold on New DOL Salary Increase Rule

A Texas Federal judge has issued a Temporary Injunction on Federal DOL changes to the Fair Labor Standards Act (FLSA) rules affecting exempt workers paid on salary (primarily those with executive, administrative, and professional duties).  These changes were supposed to become effective on Dec. 1, 2016.  The new ruling puts a temporary stay on some of those changes:

1. Salary Threshold Increase:  The DOL amendment was to increase the minimum salary to $913/week or $47,476/year (up from $455/week) in order for an employee to be exempt from FLSA minimum wage and overtime pay requirements.  The amendment also allowed employers to use non-discretionary bonuses to meet up to 10% of the new salary level.  This amendment did not change the job duties requirements, which must also be met for an employee to be considered exempt from FLSA minimum wage and overtime pay.
2. Automatic Salary Threshold Increase:  The DOL amendment was to automatically increase the minimum salary threshold noted above every 3 years, to keep pace with the 40^th percentile level for full-time salaried workers in the lowest-wage census region.

The DOL amendment also increased the minimum pay for employees classified as “highly compensated employees” (HCEs) to be exempt from minimum wage and overtime pay.  This threshold increased from $100,000/year to $134,000/year.  The new temporary injunction DOES NOT put a stay on this part of the DOL amendment.  The $134,000 minimum salary for HCEs will still be effective Dec. 1, 2016.

Net effect of this new Temporary Injunction:  the $913/week salary increase for exempt employees WILL NOT go into effect on Dec. 1, 2016.  The new $134,00/year minimum for highly compensated employees WILL go into effect on Dec. 1, 2016.  However, this injunction is not permanent.  Further court hearings will be needed before the injunction may become permanent, and the DOL could still appeal the court’s rulings.  It is also unclear if the new President’s administration will continue to push for these salary change amendments in 2017.

Whether employers decide to increase employee’s pay based on the DOL’s amendments, or to delay changes to employees’ pay based on the new injunction, or even to attempt to “roll-back” any pay changes already made, will depend on the business considerations of each employer.  We will continue to keep you updated with any new court rulings or administrative developments.  If you have any questions on this new temporary injunction or the FLSA minimum wage and overtime requirements, please do not hesitate to contact us.