WHAT HAPPENED?

A federal district court in Texas ruled yesterday that the new Fair Labor Standards Act overtime rules will not go into effect on December 1, 2016.  The court issued a temporary injunction so it could further consider whether the overtime rules should be permanently blocked.  

WHAT DOES THIS MEAN TO EMPLOYERS?  

This means that employers are not required to make any changes to their current duties and salary structure to meet the December 1, 2016 effective date of the FLSA overtime rules.   Recall that exempt status requires two things:  Duties of the employee must meet one of the exceptions, and annual Earnings must meet a threshold of $47,476 or more. If your company has already made the changes to either the duties or the earnings of its employees, here are some options:  

• If you have given wage increases to meet the threshold of $47,476 to maintain the exempt status, we suggest leaving those in place for several reasons.  First, a slight chance exists that the overtime laws may be effective in the future.  Second, it will likely be a morale and HR nightmare to roll-back raises.  If, however, you decide to take back the increases, make sure that the employees know that all of these decisions were driven by government and court action, and that in an election year, the circumstances can change very quickly.  Transparency about the process will help employees understand what is happening.

• If you have changed the duties to meet the other requirement for exempt status, this is a little easier to manage than wage increases.  In most cases in the print industry, this would likely mean that a supervisor or customer service representative was given the ability to exercise discretion and use independent judgment on significant matters.  First, if the duties were given to create exempt status (which means the person was also going to earn $47,476), consider leaving the duties in place because this employee will be exempt from overtime.  Reassigning duties to create a non-exempt position means that employee is now overtime eligible.  Second, if duties are removed or reassigned to create the non-exempt position, consider dropping the salary back to the level it was before the adjustment.  Otherwise, the employee will be eligible for overtime at the higher rate.

• If you made no changes to wages or duties, continue to monitor the situation.  Strongly consider planning for increases, however, as the new administration may want to create a different overtime regulation

WHAT TO EXPECT GOING FORWARD?  

A temporary injunction requires the court to believe that the challenge to the overtime rules has a substantial likelihood of success going forward – which is to say that the injunction may become permanent and the new overtime rules may never take effect.  

In addition, the recent elections have resulted in Republican control of both houses of Congress and the Presidency. This is significant, because the new administration could decide to simply withdraw its defense to the Texas lawsuit, and the overtime rules would be defeated immediately.  

It is possible, however, that the new administration will support some version of new overtime rules.  While President-elect Trump has not spoken about yesterday’s court decision, he has indicated in the past that he is not wholly against the overtime rules, but that he might support an exception for small businesses, and a general delay to the implementation of the rule.   Both the House of Representative and the Senate have legislation pending that were proposed by Republicans (who will control Congress for at least the next two years).  

These bills, or something similar, may be the future of the overtime rules.  Although the legislation differs slightly, if either of these bills were passed, it appears that the salary threshold for exempt positions would increase to approximately $36,000 in annual earnings, and the duties tests would remain the same.  The threshold salary amount would be phased with incremental increases occurring over several years, reaching the $36,000 amount approximately three years after the rules went into effect.  

HOW DO WE MONITOR THE SITUATION?  

PGAMA along with Printing Industries of America, will closely watch what is happening with the FLSA overtime rules and when there is news, will keep members informed by notifying immediately. If you have any immediate questions, please contact This email address is being protected from spambots. You need JavaScript enabled to view it. at 410-319-0900