By: Kara M. Maciel and Dan Deacon
On September 20, 2016, business groups and states filed two lawsuits in the U.S. District Court for the Eastern District of Texas challenging President Obama’s new overtime rule that is set to take effect December 1, 2016 . Twenty-one states banded together to challenge the U.S. Department of Labor’s (“DOL”) new overtime exemption rule in States of Nevada et al. v. United States Department of Labor et al, Case No. 1:16-cv-004070., and the U.S. Chamber of Commerce, leading a coalition of 50 national and Texas business groups, filed a similar lawsuit in Plano Chamber of Commerce et al. v. Thomas Perez et al. Case No. 4:16-cv-00732. The two lawsuits argue that DOL unconstitutionally overstepped its authority to establish a federal minimum salary level to qualify for the Fair Labor Standards Act’s (“FLSA”) white collar exemption and violated the Administrative Procedure Act (“APA”).
The New Rule & its Impact on Employers
The long awaited controversial rule was released in May 2016 to the disdain of employers, as we’ve explained in prior blog posts. The most significant change in the final rule is the new $47,476.00 minimum threshold salary required to qualify as an exempt employee, representing more than a 100% increase from the present level and a huge financial undertaking for employers. All employers throughout Continue reading
In response to the final overtime rule, which increases the minimum salary level to qualify for the white collar exemptions under the Fair Labor Standards Act (“FLSA”), employers must begin to evaluate and alter their current employee classifications and pay structures in preparation for the rule’s December 1st effective date. For many employers, it may not be possible to raise every exempt employee’s salary level to the new minimum of $47,476.00, over double the current threshold level of $23,660.00. If employers cannot raise salary levels, exempt employees will have to be reclassified as non-exempt employees entitled to overtime pay. This can be a very challenging situation for employers because many exempt employees are expected, and regularly do, work a certain amount of overtime each week to complete the required responsibilities of their positions. Furthermore, exempt employees are used to being paid on a salary basis with some level of certainty in their take home pay.
To address these issues and create some predictability for both the employer and the employee, one option is to implement a compensation structure that pays certain non-exempt employees an annual salary factoring in a certain amount of overtime. The FLSA permits non-exempt employees to be paid on a salary basis as long as Continue reading