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TEXAS JUDGE PUTS HOLD ON IMPLEMENTATION OF NEW REQUIREMENTS FOR SALARIED WORKERS: WHAT HAPPENS NOW?

On November 22, 2016, just nine days before a Department of Labor rule requiring employers to pay salaried workers at least $47,476 a year went into effect, a federal District Court judge in Texas issued a nationwide injunction blocking imposition of the rule. The decision puts hundreds of thousands of employers and approximately 4 million workers in legal limbo.

In 2014, President Obama directed the Department of Labor to update regulations defining which white collar workers are protected by the minimum wage and overtime standards of the Fair Labor Standards Act. The Department published a Notice of Proposed Rulemaking on or about July 6, 2015. After receiving feedback from more than 270,000 responses to the proposed rule, President Obama and the Department announced the publication of the final rule on May 18, 2016, with an effective implementation date of December 1, 2016.

Hundreds of thousands of employers and millions of employees have anticipated this new rule. The injunction, however, stops enforcement of the rule until the federal Circuit Court of Appeals has weighed in, and either reverses the district court ruling or affirms it. If the ruling is reversed, the new rule would go into effect immediately. With a new administration taking over in Washington come January, it is not likely the government will appeal if the ruling is upheld by the Circuit Court of Appeals.

The new rule applied to “exempt” workers, those who do not receive overtime pay. Under the prior Department of Labor rule – to which the law now reverts — employers were required to pay their exempt workers, largely managers and professional staff a minimum of $23,660 annually or $455 per week.

Under the Fair Labor Standards Act (FLSA), which applies to employees of businesses that have gross receipts/sales of at least $500,000, hourly workers (also called “non-exempt” workers) must be paid time and a half overtime after they have worked 40 hours in one week. To avoid paying overtime, many employers, especially those in the retail sector, chose to classify low-level managers as exempt employees.

Employers around the country have already put the new rule into effect, raising the salaries of exempt employees, or reclassifying them as non-exempt hourly workers.

What should employers do now? Can they rescind pay increases already given to salaried employees? Can they classify workers who were made non-exempt in response to the new rule as exempt once again? If employers have not yet made any changes in response to the new rule, can they wait and see how this all plays out?

Unfortunately, there are more questions than answers at present, but doing the wrong thing could be costly. Employers who fail to follow Department of Labor rules may be subject to fines and penalties. If you have questions about what to do, we are here to help.

The lawyers at GWINN TAURIAINEN PLLC are experienced attorneys and are happy to answer your questions. Give us a call for a free initial telephone consultation about your legal needs. For consideration of your questions in our web column, please submit your inquiry on the “Contact Us” page of our website at www.gwinntauriainenlaw.com.

ASK THE LAWYER
By: Daniel A. Gwinn, Esq.
Attorney and Counselor at Law
GWINN TAURIAINEN PLLC
901 Wilshire Drive, Suite 550
Troy, MI 48084
(248) 247-3300
(248) 247-3310 facsimile
[email protected]
www.gwinntauriainenlaw.com