In May 2016, The United States Department of Labor issued updates to the Fair Labor Standards Act (FLSA) overtime regulations. According to the new regulations—which were scheduled to take effect Dec. 1, 2016—some employees would need to be reclassified from exempt status to hourly non-exempt status.
The aggressive changes caused 21 states to file an emergency motion for a preliminary injunction, claiming that the salary threshold was raised too high. The U.S. Chamber of Commerce and other business groups filed a similar lawsuit shortly after. Judge Amos L. Mazzant of the U.S. District Court for the Eastern District of Texas ruled in their favor, barring the overtime regulations from taking effect.
Despite the injunction, these rulings continue to be a cause of concern for employers. The DOL estimates that—if ultimately passed—employers will spend $592.7 million to meet the terms of the new regulations, and will need roughly one hour to bring their current policies and processes up to speed. However, the Society for Human Resource Management finds the DOL’s estimate to be conservative and believes it will take much longer than one hour to make the necessary changes.
What you need to know about the proposed FSLA changes:
- The salary threshold would have increased from $23,660 to $47,476.
- Highly Compensated Employee (HCE) Exemption was to be raised to $134,004.
- The standard salary level was set at the 40th percentile of earnings in the Lowest-Wage Census Region, with updates every three years to keep up with inflation.
- Regulation changes affect the classification of employees, timekeeping requirements, and procedures for communicating the changes to affected employees.
What to expect:
Although the judge issued the preliminary injunction against these new regulations, this is not a permanent solution. The court will eventually review the case and issue a final ruling on the future of the new regulations. The Society for Human Resource Management predicts, “the revised regulation may face an uphill battle: The judge wouldn’t have granted the nationwide preliminary injunction unless, among other things, he thought the states showed a substantial likelihood of succeeding on their claims.”
Most employers are still following the existing overtime regulations in hopes that its recent changes are not implemented. We will keep you updated on the movements of this case and how you will be affected.
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