FLSA Overtime Rule Blocked by Federal Court, Now What?

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Well, how’s that for a plot twist!?

Only 10 days before the DOL’s FLSA overtime rule would go into effect, something has happened that no one saw coming. The new FLSA overtime regulations were set to increase the exempt salary threshold to $47,476 beginning December 1st. But, Tuesday afternoon, a surprise decision by Judge Amos L. Mazzant, III, temporarily suspended the ruling.

Employers and employees around the nation have been following this ruling closely. It would potentially impact over 4.2 million Americans.

As of right now, here’s what we know. We know it will be delayed, at least temporarily until its legality can be determined.

What’s the Fate of the FLSA Overtime Rule?

There are a lot of remaining questions. One of which, is a brand new federal administration team that is about to transition into the Whitehouse. The way they will treat this ongoing legislation remains a BIG unknown. How long the hearings will take is unknown. Will the delay turn into a death for this ruling? If we’ve learned anything over the past few months, it’s that nothing is ever a sure bet when it comes to these proceedings. This is something no one knows for certain.

Here’s What We Do Know

No matter what happens with the overtime ruling, the duties test has been the law and will continue to be the law when it comes to properly classifying employees as exempt or non-exempt. If you re-classified employees that should have been non-exempt all along, you’re in a much better position no matter what happens. You can choose to roll the dice on which way you think this will go, but one thing you should not take a gamble on is employee misclassification and FLSA related lawsuits.

On the bright side, this has been a good wake-up call for many employers who were at risk in this area and have made some good adjustments because of the increased awareness of risk in this area of employee classification.

Already Made Adjustments Based on the December 1st Deadline?

In preparation for this new ruling, you might have already made some adjustments. Like the decision to reclassify employees as non-exempt, pay them on an hourly basis, and require them to track their hours worked. If you are considering changing those employees back to salaried exempt status, please keep in mind there is a 2-step process for determining exempt status, the salary test and a duties test.

Employees must meet both tests to be classified as exempt from overtime pay. In many situations, organizations realized that employees who were classified as exempt because they met the salary test (i.e., $455 per week) were not exempt based of the duties test. You still need to rigorously apply the duties test before making any reversals. Here is more information about the job duties test.

Alternately, some employers decided to raise an employee’s salary to the new minimum ($47,476) in order to keep their exempt status and many salary increases have already been communicated around the country. In these situations, it’s very important that employers carefully weigh the risks before making any decisions regarding reversals.

What you must not do, however, is attempt to recoup any compensation paid in anticipation of the rules. Do not try to make employees pay anything back. Any salary reductions should be done with plenty of notice and explanation to employees. And, any salary adjustments should only be done going forward —never retroactively.

Following a historic presidential election, we are a nation that needs to unite more than ever.

This is also a historic ruling. Nothing like this has ever happened and it is uncharted territory. Employers, employees, law makers, and professionals in the human resource space will have to unite and get through this together as well.

As always, we’ll continue to keep you informed and protected as more news related to this ruling breaks in the coming weeks.

 

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