Changes to FLSA, if unimpeded, may have large repercussions for employers

By Karen Rabinovici

The Fair Labor Standards Act (FLSA), which applies to all employees employed in the private sector as well as to government employees, establishes the minimum wage, overtime pay requirements, recordkeeping requirements, and child labor standards.  It was the FLSA that first introduced the forty-hour workweek, the concept of minimum wage, and time and a half for overtime work, along with prohibiting “oppressive child labor,” something that was common in 1938 when the FLSA was first drafted.

The Department of Labor has long tried to make changes to the FLSA’s overtime regulations, and the fruits of its labor may be just around the corner, and were set to go into effect December 1, 2016.  The changes, however, are not without opposition, and the fate of the changes is currently on hold.  The changes, should they go forward, may impact dental and medical practice employers in particular, who often find themselves in murky waters when classifying employees as exempt or non-exempt.

The Changes

In determining which employees are exempt from receiving overtime pay and which employees are not exempt, the FLSA takes earned compensation into account.  Under the old rule, if executive, administrative, and professional employees earned less than $455 per week, or $23,660 per year, such employees were not exempt from receiving overtime pay.  The new rule changes those benchmarks to $913 per week, or $47,476 per year, increasing the number of non-exempt employees.  Additionally, under the old rules, employees who are exempt from receiving overtime pay under provisions relating to “highly compensated employees” must be paid $134,004 per year, up from $100,000, again increasing the number of non-exempt employees.

The new rule will prompt employers to make necessary changes to their classification of executive, administrative, and professional employees.  If an employee’s salary no longer meets the new minimum requirements, and another exemption does not apply, reclassification may be necessary, accompanied by overtime pay.  Alternatively, employers may increase salaries to maintain exemptions.

The Challenge

In an 11th hour plot twist, on November 22, 2016 the U.S. District Court in Sherman, Texas issued an order enjoining the Department of Labor from implementing the new rule.  Prior to this, 21 states filed an emergency motion for a preliminary injunction to stop the new rule, arguing that the Department of Labor has exceeded its authority in increasing the salary minimums for exempt employees.  Additionally, the fact that the changes do not take the nature of employee duties into account, which can often determine whether an employee is exempt or non-exempt, has been another argument of the new rule’s opponents.  A date for a full ruling by the Court has not yet been announced.  So, until the Court rules on the Department of Labor’s authority to implement such changes, employers do not need to comply with the new rule and can maintain the status quo.

Pierce & Mandell’s experienced employment law attorneys can guide employers and workers through the classification and employment process.  We encourage employers and workers alike to contact us to ensure that terms of employment are compliant with the relevant laws.

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