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Developments with the Department of Labor’s Proposed Overtime Regulations: What’s Going On?

Insight & Impact - Labor & Employment Regulatory Newsletter Otto Immel

ISSUE: We all remember that on May 18, 2016, the Department of Labor announced a final rule change to the so-called "white collar" overtime exemptions under the Fair Labor Standards Act. Before the change, employees making less than $23,600 per year did not qualify for those exemptions. Under the new rule, employees making less than $47,476 per year would not qualify. The rule was set to take effect on December 1, 2016. In November 2016, a federal judge in Texas granted a nationwide preliminary injunction blocking the rule from going into effect. That case is now on appeal at the Fifth Circuit. If the injunction is reversed, employers could be liable for the period between the original December 1 effective date, and the date of appellate reversal. However, the new Secretary of Labor, Alex Acosta, indicated during his confirmation hearings that the Department may not pursue the appeal. If that happens, the Texas injunction would remain in effect. The Department could also choose to rescind or change the proposed final rule, but would require an entirely new rulemaking process, including new notice-and-comment periods, drafts, and revisions.

Read more Insight & Impact from May 2017:

IMPACT: As the legal process plays out, employers should consider the following:

  • Be thoughtful and proactive about messaging to employees. Many employers already adjusted salary levels and classifications in anticipation of the December 1 effective date. Those changes may be difficult to undo as a practical matter. Many employers are leaving those adjustments in place, but are considering their impacts on future salary increases and staffing needs.
  • Be cautious about converting employees to independent contractors to try and escape the current legal limbo. In order to qualify as independent contractors, workers must meet separate, strict tests which are also under increased scrutiny.
  • Assess your company's legal risk for any lag period if the Rule is untimely upheld on appeal.

For more information, please contact your local Quarles & Brady attorney or this member of our employee benefits group:

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