Employers who were scrambling to comply with the December 1, 2016 increase to the salary requirement for exempt employees can breathe a little easier, at least for a while.
Earlier this year, the Department of Labor issued regulations which would have increased the minimum weekly salary required for an employee to be exempt from the overtime requirements of the Fair Labor Standards Act of 1938. Generally speaking, employees are required to be paid time and a half of their regular rate of pay for all hours worked beyond 40 in a workweek. However, there are exceptions to this general rule.
Three of these are the executive, managerial, and professional exceptions. They are commonly referred to as the "white collar" exemptions. People who meet the exemption's requirements are not entitled to overtime pay. There are three requirements for the exemption: (1) the employee must be paid on a salary basis; (2) the weekly salary must meet the minimum amount set by the Department of Labor (this is currently $455 per week); and (3) the employee must perform exempt duties.
The Department of Labor changed the second prong of that test, requiring the minimum salary amount to go from $455 per week to $913 per week. The regulation also would have caused that minimum salary requirement to automatically increase every three years. This change was supposed to take effect December 1, 2016.
Suffice it to say, many employers, including governmental employers, became concerned about how they would be able to meet the new salary requirement. Some employers considered paying otherwise exempt employees on an hourly basis and simply paying them overtime. Other employers, like the states that filed suit in the United States District Court in Texas, realized that the dramatic increase in salary amount would result in budget increases that the states could not fund. These states argued that the salary increase could cost millions of dollars. This could result in layoffs and a reduction in services.
The District Court agreed that the states and commonwealths that filed suit (Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, Nevada, New Mexico, Ohio, Oklahoma, South Carolina, Texas, Utah, and Wisconsin), had provided sufficient proof to justify a temporary injunction against the increase.
In short, at this time, employers are not required to increase the salaries of their exempt employees on December 1, 2016. Of course, employers are free to set the salaries of their exempt employees above the $455 weekly minimum if they choose to do so. However, as of right now, employers are not required to increase the salary rate to the $913 per week on December 1, 2016.
Employers should note that this injunction is temporary. This means that the injunction could be lifted and the requirement of the increase could return. However, based on the logic used by the Court and the dramatic impact of the temporary injunction, it would not be surprising to see extensive challenges of the decision, likely all the way up the United States Supreme Court. You can read the decision of the court here.
Keep tuned in to blog updates from Thorpe & Thorpe, P.A. to learn more about this ongoing issue.