A federal court in Texas has halted nationwide preparations for the new FLSA overtime rule set to go into effect on December 1, 2016. That rule raised the salary basis required to maintain federal overtime exemptions from $455 per week to $913 per week, and included a mechanism for automatically updating the salary limits every three years. While the salary test was previously updated on an infrequent basis (the last update occurred in 2004), the salary basis plus job duties test has been utilized since the Fair Labor Standards Act was enacted in 1938. Recently, two separate groups filed related challenges to the new rule, arguing, among other things, that the Department of Labor exceeded its authority and ignored Congress' intent by raising the minimum salary level in a way that it effectively replaces the job duties tests. The groups filed their actions in the Eastern District of Texas, asking the court to block the new rule.
On November 22, 2016, Justice Amos L. Mazzant issued an Opinion and Order agreeing with this argument. According to Judge Marrant, "this significant increase to the salary level creates essentially a de facto salary-only test." On this basis, Judge Marrant determined that the plaintiffs had a likelihood of success on the merits of their case.
This decision is a preliminary injunction only. While there are likely to be further proceedings before the matter becomes final, businesses and employees should be aware that the December 1 deadline no longer applies and employers may continue to wait and see what actions if any they should take.
A New Rule in New York?
In the meantime, on October 19, 2016, the New York State Department of Labor proposed new changes to the salary basis minimums for exempt employees in New York. While these changes are still in proposal form, there is reason to believe they will become final. These proposed salary amendments would be different for "large" (11+ employees) and "small" (10 or fewer employees) employers, and employers outside of New York City. However, the current proposal requires "large" NYC employers to provide a salary of at least $825 per week on or after December 31, 2016 to maintain exempt status, $975 per week on or after December 31, 2017 and $1,125 per week on or after December 31, 2018. Thus, starting on December 31, 2017, the salary basis threshold for some New York employers would exceed the new federal threshold of $913 per week.
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