既にお聞き及びの方も多いと思いますが、11月22日の連邦地方裁判所の判断により、12月1日に施行予定であったFair Labor Standards Actで規定されるExempt従業員のSalary Level Testにおける給与レベル引き上げは一時凍結される事になりました。
This memo represents a significant and sudden change to a federal ruling regarding overtime that employers have been expecting and planning for the past several months. Please read this memo carefully as there are serious implications regarding employee compensation changes.
In late May 2016, the U.S. Department of Labor (DOL) issued a very important new ruling involving overtime pay that was expected to affect most U.S. employers and make several million employees throughout the country eligible for overtime pay. The ruling, called the Final Rule, increased the minimum salary needed for an executive, administrative, or professional employee to be considered exempt from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime requirements. Basically, the Final Rule roughly doubled the minimum salary requirements from $23,660 per year to $47,476 per year. If an affected employee’s salary was not increased to the minimum threshold, the employee would become non-exempt and thus, eligible for overtime pay according to the FLSA.
The Final Rule was set to become effective on December 1, 2016. However, over the course of the last several months, 21 states filed lawsuits against the federal government and on November 22nd, the U.S. District Court for the Eastern District of Texas issues a preliminary injunction preventing the DOL from implementing the Final Rule on December 1st.
With the preliminary injunction in place for the time being, employers are no longer under the December 1st deadline. However, the injunction is preliminary and not permanent and there could be several complicated legal responses over the next several months that could result in different endings that include the Rule could be allowed to move forward and be retroactive to December 1, 2016, the Rule could be permanently stopped, or even the U.S. Congress could get involved and overturn the Rule.
Although employers are not required to comply with the Final Rule on December 1 for the time being, caution should be taken due to the possibility of the Final Rule moving forward and applied retroactively to December 1, 2016. Therefore, although employers do not have to change their current pay levels for affected employees, they should begin tracking those employees’ hours in a possible anticipation of the preliminary injunction being overturned and the Final Rule become retroactive to December 1.
For any employer that has already increased, or planned to increase affected exempt employee salaries to $47,476 to maintain their exempt status, they would be within their right to rescind the salary increases (but not recoup any increase already paid). However, taking this approach will most likely create employee relations problems. As an option, employers taking away raises could make up the difference with a performance-based or one time spot bonus, which could reduce the negative affect of the salary reduction.
Going forward, although an appeal is expected by the Department of Labor to implement the Final Rule, it should be noted that President-Elect Trump criticized the Final Rule during the President campaign and expressed support for a carve-out for small business, and it is quite possible that the new Trump administration will not support an appeal.
HRM Partners, Inc.