In response to a coalition of states and business groups that sued the Department of Labor earlier this year, a U.S. District Court in Texas has granted a preliminary injunction against the enforcement of the new federal overtime rule that was set to go into effect on December 1st. This injunction does apply nationwide and prevents, at least temporarily, the Department of Labor from implementing the increase to the minimum salary threshold.
Just yesterday, HR Works sent out a special notice to remind employers about the upcoming increases. However, this injunction, granted late last night, provides a temporary and potentially indefinite reprieve for employers nationwide. However, some states, such as New York, have proposed or approved increases to the minimum thresholds at the state level. Therefore, employers must still comply with any state laws that may affect the minimum salary threshold for exempt employees.
What Happens Now?
- Because it is impossible to predict how the current and upcoming administration will react to the injunction, HR Works, after consulting with legal counsel, is recommending the following as best practice:
- Employers who have already made changes to comply with the previous December 1st deadline should consider staying committed to the changes until additional information is available.
- The potential exists for the Federal Department of Labor to appeal the injunction which could put the Federal Overtime Rule back in place and thus require employers to be in compliance all over again. If the courts drag the case out, then the new incoming administration will become involved and the Overtime Rule may in fact never go into effect. If this is the case, at least the decision will be final and each employer will then be able to re-evaluate and make informed necessary changes (ex. reclassifying a non-exempt employee back to exempt).
- Employers should still pay attention to ensuring correct classification aside from just the salary threshold concern. We have seen many employers discover through this process that their previously exempt employees actually did not meet the duties test as outlined by the Federal Department of Labor.
- Employers who have not already made changes should ensure compliance with any state increases that are set to go in effect and wait for additional developments at the Federal level.
- Employers with specific questions regarding the case’s impact on their workplace overtime requirements should contact a knowledgeable employment law attorney.
What About New York?
The New York State Department of Labor has proposed an increase in the minimum salary threshold for exempt Executive and Administrative employees. This increase is set to go in effect on December 31st. The increase, albeit less significant than the proposed Federal level, will have an impact on employees who are making less than the proposed salary level (chart below) and are classified as exempt under the Executive and Administrative exemptions. It is highly unlikely that this increase will not go into effect at the state level. Therefore, HR Works is advising that New York employers ensure compliance with these proposed levels.
In Human Resources, and especially with regard to employment law, we see that “the only thing that is constant is change.” Therefore, clients are encouraged to contact the HR Works Helpline with any additional questions regarding these changes. In addition, we will continue to notify clients of any additional information or changes regarding this development as it becomes available.