On Tuesday, November 22, 2016 Judge Amos Mazzant issued an injunction to bar President Obama’s revisions to the Fair Labor Standards Act. The revisions were expected to go into effect on December 1st and would have essentially doubled the exemption threshold for overtime pay from $23,660 to $47, 476 and impacted over 4 million workers. On October 12, twenty-one states filed an emergency motion to temporarily bar the revision citing the burden the new rule put on State budgets and their perceived unconstitutionality of the amendment.
When referring to today’s ruling, Judge Mazzant stated in his order, “The State Plaintiffs have shown a likelihood of success on the merits because the Final Rule exceeds the Department’s authority.” “[T]he Department exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test,” the judge went on to say. “The Department’s role is to carry out Congress’s intent. If Congress intended the salary requirement to supplant the duties test, then Congress, and not the Department, should make that change.”
Today’s motion does not eliminate the revisions to the FLSA overtime rule. The injunction simply halts the revision from becoming effective on December 1st of this year. Additional court proceedings will be required to determine whether the Department of Labor has standing to modify the existing rule.
If courts find that the revision is found in indeed within the scope of power of the Department of Labor, many are expecting the Trump administration to intervene to relieve the burden the revision places on many small businesses or completely kill the DoL’s revisions. In an August 2016 interview, the President-elect hinted that he at least favors a small business exemption to the FLSA Overtime Rule Change. Ross Eisenbrey, vice president of the Economic Policy Institute estimates that a small business exemption would allow roughly 50% of American businesses to avoid the possible regulation.
As media attention and the anticipated deadline approached, many employers had already taken steps to follow the FLSA overtime revision. Should the revisions be fully overturned or a small business exemption be issued, early adopters and employees may face the question of “what now.” Taking away the increased salaries many employers implemented could result in serious employee turnover and general turmoil.
In a recent NPR interview, Blair Boyer, Human Resources Director for Albuquerque’s Dion’s Pizza expressed the sentiments of many employers faced with the possibility of the revisions being overturned, “We may move forward with the plan that we have currently in place ’cause we want the end result being ease and simplicity of use on our employees and to not have such a dramatic shakeup. Oh, we were just kidding. You know, we’re going to go back to where we were. That wouldn’t be good for our culture.”
Whether the FLSA revisions are upheld or overturned later, employers will continue to be faced with the challenge of balancing fair wages, employee turnover and profits margins. To find out how Netchex helps thousands of companies effectively manage payroll, compliance and more contact us today.