Last week, a federal District Court Judge entered an injunction blocking the implementation of Department of Labor (DOL) Regulations that would have significantly increased labor costs for thousands of Employers. The Regulations were scheduled to take effect on December 1. This injunction will have a nationwide effect.

What the Regulations Would Have Required

The Fair Labor Standards Act (“FLSA”) classifies workers as “exempt” and “non-exempt.” “Non-exempt” workers must be paid overtime (at the rate of 1.5 times the employee’s base rate) for all hours worked beyond 40 hours in a work week. For a worker to be exempt from entitlement to overtime, a three-prong test must be met: 

1. The worker must be paid a weekly salary;
2. The salary must be at or above a stated minimum (currently $455 per week); and
3. The worker must perform certain duties, which are generally considered “white collar” work.

Unable to secure from Congress a significant increase in the minimum wage, last May the Administration proposed Regulations that doubled the weekly salary threshold below which overtime must be paid, to $933 per week. The effect of the Regulations, had they not been enjoined, would have been to significantly increase the pool of workers eligible for overtime, exposing many employers to substantial increases in wage expense. The Regulation would have also implemented an automatic adjustment of the salary level every three years.

The court challenge to the Regulations was considered by most observers as a “hail Mary” effort to prevent their implementation. The judge ruled, however, that the higher salary level for exempt status effectively eliminated the duties test under the FLSA and made the salary level the only real test for exemption. The judge found this to be unlawful.

There is no word yet as to whether the DOL will appeal the ruling, but if it does, and if the normal briefing schedule is followed, there is no possibility that the Appeals court could rule before Inauguration Day. The President-Elect’s views on the subject are not clear. He has indicated that he favored a small business exemption to the Regulations and might eliminate the automatic three-year updating of the salary level, but did not expressly state he was opposed to the basic concept of the Regulations. 

For now, Employers need do nothing although there might be a need to address morale issues if an Employer already has announced salary changes effective December 1 that will now not need to take place.

I would be happy to speak with you should you have any questions regarding your rights or obligations under the new ruling. Please feel free to contact me via phone at 215.495.6541 or via email at rsmall@regerlaw.com.