12/08/2016

FLSA Rule Changes Delayed By Court Injunction

For months, many employers had been preparing for December 1, 2016, the date on which new Fair Labor Standards Act (“FLSA”) overtime rules were scheduled to go into effect.  These new rules would significantly increase salary thresholds for exempt positions, which would likely result in many employers paying overtime for time beyond forty hours to traditionally salaried employees.

On November 22, 2016, a federal judge in the Eastern District of Texas entered an injunction enjoining the United States Department of Labor (“DOL”) from implementing the new rules.  The injunction applies nationwide and, at the very least, delays the implementation of the new rules for all employers and employees.

This decision arose out of an action filed by the State of Nevada and twenty other states, as well as an action filed by a Texas-based Chamber of Commerce and other business organizations, challenging the news rules of the DOL.  These new rules would not only have doubled the threshold salary, but also would have included automatic increases every three years beginning January 1, 2020.   The new rules also amended the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to ten percent of the new standard salary level.

In its decision, the Court determined that the plaintiffs had satisfied all the elements required for the issuance of a preliminary injunction, and notably that they “have established a prima facie case that the Department’s salary level under the Final Rule and the automatic updating mechanism are without statutory authority.”

It is unclear what will occur in the coming months given the recent political developments in Washington, D.C. The decision does not challenge DOL’s overall ability to establish an increased base salary limit.  As such, there is the possibility that a revised rule in the weeks and months ahead could be offered, or nothing at all.

Robinson Donovan’s Employment Law Group will continue to monitor this issue, and provide timely updates.  If you have any questions, please contact the firm’s ELG.