FLSA 101 Update: A New Administration May Not Mean a New Rule

The Fair Labor Standard Act (FLSA) final rule on overtime was to take effect on December 1, 2016. Last fall, we explained the changes and gave some tips for compliance. Then in September, a lawsuit was filed to challenge the final rule. What’s happened since then? Let us bring you up to speed.

I’ll See You in Court … Maybe

Timeline

• November 22, 2016: A U.S. District Court in Texas hears State of Nevada ET AL v. United States Department of Labor ET AL. Judge Amos Mazzant grants a preliminary injunction against the rule, in effect until the court conducts a hearing and issues its decision.
  
  
• December 1, 2016: The Department of Labor (DOL) appeals the injunction to the U.S. Court of Appeals for the Fifth Circuit.
  
  
• February 17, 2017: The DOL (now under the Trump administration) files a motion “to allow incoming leadership personnel adequate time to consider the issues.” The DOL is granted a 60-day extension - until May 1 - to file its brief.
  
  
• March 22, 2107: Secretary of Labor nominee Alexander Acosta appears before the Senate Committee on Health, Education, Labor and Pensions. The Washington Post reports that, while he declined to state whether he supports the rule changes, Acosta told the Committee it's “unfortunate” the rule has remained unchanged since 2004, but that the salary threshold as proposed would increase business costs.

If confirmed, Acosta could continue the appeal against the injunction or drop it, stopping the rule change. Or he could start over and “propose an administrative delay of the rule as revised by the Obama administration, followed by a new notice of proposed rule-making and comment period, leading to a new final rule … a year or so down the road,” says Tammy McCutchen, former administrator of the DOL Wage and Hour Division during George W. Bush administration. 

We’ll have to wait and see.

What’s an Employer to Do?

Where does this leave you, the employer? The short answer is that as of right now, you don't have to implement the new rule.

But what if you have already made changes to employee salaries or classifications? Here are five tips:

1. “If you have already raised employee salaries, it may be difficult to reverse course on the amount of pay as a matter of employee morale as well as possibly legally,” says attorney Karen S. Elliott in the February 2017 issue of Employee Benefit Plan Review (volume 71, issue 8, pages 3-4). 
2. According to Tammy McCutchen, you can change the rate at which you raise salaries over two or three years until they realign with comparable market salaries.
3. “Employee classification is based on the specific duties performed by each individual employee … if the newly classified non-exempt employee continues to perform exempt duties, and also meets the current minimum salary, there is no legal reason why the employer could not revert to the prior exempt classification as long as all other exempt texts are met,” says Karen S. Elliot.
4. Cover yourself: Clearly distinguish exempt from non-exempt jobs, especially in written job descriptions.
5. Watch your state’s department of labor for legislation modeled on the May 2016 rule (find your state at www.dol.gov/whd/contacts/state_of.htm). Currently, New York, Rhode Island, Connecticut, Maryland, Wisconsin and Michigan have passed or are considering bills.

So - stay in the know. If you need help traversing the murky waters, contact a seasoned professional.