Up In The Air:  What Does the Recent Court Injunction Mean for the New Overtime Rules?

Up In The Air: What Does the Recent Court Injunction Mean for the New Overtime Rules?

As many business owners know, the Department of Labor recently increased the salary level which must be paid to workers who are considered exempt employees under the executive, administrative, or professional exemption of the Fair Labor Standards Act. This exemption is one of a handful set forth in the FLSA and is often referred to as the EAP or “white collar” exemption. The Department’s new rule would have raised the required minimum salary to qualify for the EAP exemption from $23,660 per year to $47,467 per year. To be considered exempt from the overtime requirements under the EAP exemption, an employee must meet three tests: (1) they must be paid on a salary basis; (2) they must be paid a specified minimum salary; and (3) their duties must be primarily executive, administrative, or professional in nature according to a multi-pronged “duties test.” The new salary level was set to go into effect on December 1, 2016.

On November 22, 2016, a federal district court judge in Texas issued a preliminary injunction preventing the Department from enforcing the new salary level. Colorado business owners may be wondering whether they have to comply with the new salary level, the old salary level, or no salary level at all in light of the court’s decision.   

What happens next is still up in the air. The Department of Labor posted a statement expressing their disagreement with the court’s decision and stating that they’re considering all of their legal options. This may signal that the Department will challenge the court’s ruling. The same court may decide not to issue a permanent injunction—even though it issued the preliminary injunction. An appeals court could overturn the preliminary injunction and clear the way for the new salary rule. An out-of-court resolution could be brokered, which may or may not include yet another salary level. Given the uncertainty, business owners in Colorado should still ask themselves now:

  • Do I have any employees whose job duties could be considered executive, administrative, or professional? Most questions arise when trying to determine if someone qualifies as an “administrative” employee.
  • Do I pay them a salary? But, be aware that paying someone a salary is only part of the question.
  • How much do I pay each employee?

If an employee could be an executive, administrative, or professional worker and they earn between $23,660 per year to $47,467 per year, businesses are well-advised to work with qualified counsel to assess their legal options. It’s important for businesses to correctly classify their employees as exempt or non-exempt or risk the potential for penalties and litigation. If you have questions about this or any other overtime exemption issue, you may reach a BHGR employment attorney (http://www.bhgrlaw.com/practices/employment-law/) by calling 303-402-1600.

 

This article is intended to provide general information and, therefore, should not be treated as legal advice. If you have questions about a specific legal issue, you should seek the advice of a qualified attorney.

Author: Katie Pratt

Editor: Rudy E. Verner