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Amos L. Mazzant III

Judge Mazzant   from a court in Tyler, Texas, just gave employers who were trying to catch up to the new timekeeping and overtime pay regulations a little reprieve.

And this isn’t exactly what you’d think–This isn’t just a Texas thing.  This is a Federal, US District court that just coincidentally happens to be in the heart of East Texas.   And,  this isn’t just a Texas case, it’s 19 states in total and is even named “Nevada v. DOL”.

 

What is the Fuss About?

 

U.S. Department of Labor (“DOL”) had updates it’s rules on overtime pay under the Fair Labor Standards Act (“FLSA”).  The Rules were designed to update the  income threshold at which an employee could be qualified as “Exempt” from overtime pay.  These updates were scheduled to take effect December 1, 2016.  The rule would have affected approximately 4 million executive, administrative and professional (“EAP”) employees, making them eligible for time-and-a-half pay for all hours worked in excess of 40 per week if their salary is below $913 per week ($47,476 per year).  The new threshold would have doubled the current threshold of $455 per week ($23,660 per year).

 

Who didn’t like the updated rule?

Plenty of people weren’t loving the increased requirements, Employer and Employee alike.  Many companies were struggling to implement new policies and software for time keeping.  HR professionals were struggling with the requirement from a “culture” perspective. And, an overwhelming number of small business owners were very worried about having to increase wages not only to their entry level workers but to their mid level managers as well.  Some were even facing the reality of their higher wage management performing more of the routine duties of lower wage workers who would now be “silently-limited” from working overtime. Thus, pushing more work and more overtime hours only to those employees who were qualified as “Exempt”.

 

What was the Technical Ruling?

The states alleged that the DOL’s overtime rule is illegal because the minimum salary threshold of $47,476 makes millions employees non-exempt when their duties clearly qualify them to be treated as exempt.

Judge Mazzant III agreed, finding that the minimum salary level and the automatic updating mechanism in the new regulations are without statutory authority under the Fair Labor Standards Act (“FLSA”).  Essentially, the Court concluded that the new rule imposed a de facto minimum wage requirement for these employees who are currently “exempt” based on their duties tests.

 

Will the Rule Clock Back In?

This is only a “Preliminary Injunction”.  The court still has a chance to review the merits of the case and pass final decisions.

Experts however see this as an uphill battle.

How should you react?

If you’ve already reclassified employees or given wage increases,  you may want to keep those changes in place.  Going backwards could be grounds for what many non-lawyers call a “Hot-Mess”.  Consult your Labor Attorney before making a mistake.

You should also not consider this a permanent yet.   Any updates to internal time-keeping still need to be ready to implement either now or at a later time. Your research (and soul-searching) on employee wages was likely a very fruitful exercise in terms of not only your company strategy, but also the talent evaluation that you were silently and publicly conducting.

Basically, don’t shelve the research and work you’ve done.   You need to have solid and executable plan in place should you need to be nimble and change in the near future.

 

Bret Brummitt

Bret Brummitt

Senior Consultant

About the author: An avid learner and resourceful leader with a passion for problem solving, Bret is a calming force in the chaos and fast paced evolution of health insurance, employee benefits, and the growing burden of regulatory compliance. He helps people develop the confidence to see beyond the problem at hand and start to re-imagine their goals. Whether he’s helping a client or a colleague, Bret believes a successful interaction is one that allows us all to dream a little bigger when we’re done.

About AG Insurance: AG Insurance (www.agiainc.com) helps employers and their employees with solutions focused on positive organizational impact and improved employee experiences.