FLSA Overtime Rule Update

UPDATE:  The final Fair Labor Standards Act’s (FLSA’s) overtime rules which were set to go into effect on December 1, 2016 are on hold.  A nationwide injunction against enforcement of the new salary minimums was issued on November 22, 2016 by a federal judge in Texas, based on a preliminary finding that the Obama administration exceeded its authority in raising the income limit so significantly.

As you may know, the new salary minimums were expected to drastically increase the FLSA’s salary threshold for exempt status and called for automatic increases every three years beginning in 2020.

While this is a welcome ruling for employers, it begs the question of what comes next.

First, employers do not need to implement the FLSA salary bump by the December 1, 2016 deadline. Whether this increase will be reinstated down the road remains unclear.  We will, of course, keep you updated of any new changes.

Second, employers who have already implemented changes to address this increase may determine that it is wise to leave those changes in place.  Assessing whether this is best for your business will turn on the nature of your operations, the number of individuals affected, the expectation of salary increases, the bottom-line costs, and so forth.  Please contact our office if you have questions regarding whether salary changes should be implemented notwithstanding this new development.

Third, California employers must remember that even if the federal salary minimums are invalidated, a California minimum wage increase will become effective January 1, 2017 for employers with 26 or more employees.  Increases to state minimum wage rates impacts exempt salary minimums and those state-imposed increases will not be impacted by this ruling.

As most California employers have learned, wage and hour compliance is a moving target.  This new development is another reminder of that reality.  Our office will continue to monitor this issue and will provide updates as this develops.  In the meantime, if you have any questions about this or any other employment law matter, please contact our office to discuss.