Late in November 2016, the United States District Court for the Eastern District of Texas granted an Emergency Motion for Preliminary Injunction which stops the changes to the Fair Labor Standards Act that were scheduled to take effect on December 1, 2016. The injunction applies to all fifty states, and it puts at least a temporary halt to the proposed new changes, including the increase in the minimum salary level for those employees who are exempted from federal minimum wage and overtime rules.
When it first became a federal law in 1938, the Fair Labor Standards Act (FLSA) established the 40-hour week, the minimum wage, and the rules for overtime. In 2014, the White House ordered the Department of Labor (DOL) to simplify and modernize the FLSA so that it’s easier for workers and businesses to understand and apply. In response to the 2014 White House order, the Department of Labor issued a “final rule” regarding overtime, including an increase in the minimum salary level for exempted employees, that was set to take effect on December 1, 2016.
However, twenty-one states including Florida challenged the Department of Labor’s proposed new final overtime rule. The states filed a lawsuit with the U.S. District Court for the Eastern District of Texas. The lawsuit claims that the changes proposed in the new final rule exceed the Department of Labor’s authority to raise salary and compensation levels for exempt executive, administrative, professional, and highly compensated employees.
PRECISELY WHAT DOES THE PROPOSED NEW RULE DO?
The proposed final rule increases the minimum salary level for exempt employees from $455 per week to $921 per week. It would also establish automatic updates every three years to the minimum salary level, starting in 2020. The proposed rule updates the regulations for determining if a white collar salaried employee is exempt from the FLSA’s minimum wage and overtime rules. Finally, the proposed new final rule is designed to enhance the protections currently in place for those salaried workers who are already entitled to overtime. Certain employees such teachers, attorneys, and doctors would not be subject to any changes.
In October 2016, the State of Florida and twenty other states asked the District Court for emergency preliminary injunctive relief. The states are challenging both the legality of the final rule and the Department of Labor’s authority to implement it. In November 2016, the District Court held a preliminary hearing to consider oral arguments regarding the motion. After the oral arguments, U.S. District Judge Amos Mazzant III, appointed by President Obama, issued a nationwide temporary injunction stopping implementation and enforcement of the final rule pending a further order of the court.
According to Daytona Beach small business attorney Melody Lankford, “many employers had already taken steps to implement the rule prior to this recent development. For example, employers may have met with employees about salaries or changes to employment status from exempt (salaried) to non-exempt. With this new development in mind, it is important for employers to communicate with those same employees again and explain how the new development will affect them moving forward (either no change or moving forward with proposed changes).”
WHAT WILL EMPLOYERS NEED TO DO?
Attorney Lankford also suggests that employers may need to reinforce the fact that every employee’s contribution to the workforce is valued and that their work is appreciated. What else should employers do? First, suspend any changes in your employment policies that had been planned to satisfy the requirements of the proposed new final rule. Secondly, maintain the employment policies that comply with current FLSA regulations. Finally, educate your managers and HR personnel about the injunction blocking the final rule.
In September, the House of Representatives itself voted to delay the implementation of the final rule. Michigan Representative Tim Walberg, who introduced the proposal to delay, said the overtime rule “burdens hard-working small business owners” and “jeopardizes vital services for vulnerable Americans.” Oklahoma Senator James Lankford offered a similar proposal in the Senate.
At that time, the White House had announced that it would veto any legislation delaying implementation of the final rule, but the delay in the implementation of the final rule will now last beyond January 20 – the end of this president’s term. The Obama administration has the option of appealing the injunction to the Fifth Circuit Court of Appeals in New Orleans, and it’s possible that the appeals court could remove the preliminary injunction. However, a new Congress could change the law entirely and even restrict the Labor Department’s rule-making authority in setting wage thresholds for overtime pay.
WHY WAS AN INJUNCTION AGAINST THE NEW RULE SOUGHT AND ISSUED?
The president-elect and his team have not set forth a position on the final rule or on the injunction that delays its implementation. The injunction does not say that more workers should not receive more overtime pay. It only says that Congress, and not a Cabinet department, is the most appropriate government body to make major changes on the question of who should be eligible ofr overtime pay and how that eligibility should be determined under the existing law.
But that’s not the only objection to the new rule. The Department of Labor projects that if the new rule finally takes effect, compliance will cost employers about $295 million per year over the first ten years. The rule would also impact retirement plan sponsors that provide matching contributions on employee deferrals or other employer contributions based on employee compensation levels. Senior vice president and general manager of ADP Retirement Services Joe DeSilva said, “I think the additional cost will be somewhat sizeable.”
If you’re an employer in Central Florida, the injunction preventing the new FLSA rule from taking effect is a good example of why you need to partner with an experienced Daytona Beach small business attorney for the legal advice that’s pertinent and specific to your own business circumstances. A small business attorney can also draft and negotiate contracts; conduct internal audits and investigations; develop corporate business plans and compliance programs; help manage employee relations; protect your intellectual property; and act as your corporate secretary and registered agent.
Every day, it seems, something happens in the law that impacts small business, whether it’s a new statute or regulation, a court ruling or injunction, or a new administration leading the country. It’s impossible to run your small business effectively and be your own small business attorney simultaneously – instead, you must be advised by someone whose job is staying abreast of new legal developments and keeping you informed about what every small business owner need to know.