New FLSA Overtime Regulations Face Legal Challenges
As employers know, the final rule updating the federal overtime regulations was published in May 2016 and is scheduled to take effect December 1, 2016. The biggest impact of the new rules is the huge increase in the minimum salary required to qualify as exempt from overtime under the FLSA’s executive, administrative, and professional exemptions. Under the new rules, the minimum salary to qualify for exempt status is $47,476 (more than double the existing minimum) and is subject to further automatic increase on January 1, 2020 and every three years thereafter. Industry groups have voiced strong opposition to the new rules, prompting members of Congress to introduce legislation seeking to delay implementation of the new rules by six months. The House passed one such bill, HR 6094. A similar bill has been introduced in the Senate. However, President Obama has already vowed to veto these bills should they reach his desk.
Meanwhile, industry groups and a coalition of 21 states have filed two separate lawsuits in the Eastern District of Texas seeking to block the new overtime rules. A motion for a preliminary injunction to halt the implementation of the new rules is set for hearing on November 16. The industry groups have also filed a motion for summary judgment with a request for an expedited hearing before December 1. Both lawsuits allege that the overtime regulations were issued in excess of applicable authority and should be declared unlawful and set aside. Notably, these lawsuits are pending before the same District Court that just issued an order enjoining most aspects of the Obama administration’s Fair Pay and Safe Workplaces Executive Order (and implementing regulations) that was scheduled to take effect October 25, 2016.
Importantly, as of now, the overtime regulations are still scheduled to take effect December 1, 2016, and employers are still urged to take steps to ensure timely compliance if they have not already done so. This means that employers should review the compensation levels for their exempt executive, administrative, and/or professional employees employees to determine which employees’ salaries are below the new $47,476 threshold. For employees whose compensation does not meet the new minimum salary threshold, employers should determine whether to (1) give the employee a salary increase to at least the new minimum; or (2) re-classify the employee to non-exempt and start tracking hours worked and paying overtime compensation in accordance with the FLSA and applicable state law(s).
We will keep you posted of any developments in these lawsuits or on the legislative front that impact the overtime regulations and/or their upcoming December 1 effective date.