Late Tuesday afternoon a Texas federal court entered an order providing a nationwide injunction blocking the implementation and enforcement of the new FLSA minimum salary threshold for exempt employees. The ruling comes just over a week before the new minimum salary requirement was set to take effect. The new salary threshold, announced in May, was set to increase the minimum salary requirement for an employee to be exempt from overtime compensation from $23,660 to $47,476 annually.
The ruling was triggered by 21 states (Florida not among them) and over 50 business organizations, filing separate suits challenging the salary increase including an automatic mechanism that adjusts (increases) the minimum salary level every three years.
What does this mean for your business? As it stands, the current salary threshold, $23,660 annually / $455 per week will remain in effect until the temporary injunction is vacated or modified upon appeal. None of these nullifying events are likely to occur prior to the previously scheduled December 1 implementation date.
The increase in minimum salary was expected to impact over 4 million employees. Unfortunately, most employers have already made the decision to either increase an impacted employee’s salary or convert the employee to hourly wages, making them subject to time and a half for all hours worked in excess of 40 hours in any given workweek.
The temporary injunction entered yesterday obviously affects employers’ decisions. The challenge in the short-term will be explaining to employees the current state of the law and possibly rescinding a recent decision to either increase their salary or convert them to hourly. This is further complicated if the employer already communicated this decision to the employee.
With the presidential regime change less than 60 days away, and President-Elect Trump’s pledge to cancel several of the Obama Administration’s policies, the chances of the overtime rule being ‘resuscitated’ seems improbable at this time.
This is the second federal court ruling in the past 10 days that blocked DOL regulations showing early signs that the DOL could be disarmed in the next 4 years.
Notwithstanding this pro-employer ruling, employers should continue to closely monitor the status of the temporary injunction. A rescission of the injunction would put employers in the same position they were faced with prior to Tuesday’s ruling.
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