A few weeks ago, we told you about the judge who blocked President Obama’s so-called “Fair Pay” regulations from taking effect.
Now, yet another significant regulatory effort has been struck down by a judge. We refer to the new overtime rules that were scheduled to take effect on December 1. Those rules would have required any employee who earns less than $47,476 per year to be paid time-and-a-half if he or she works more than 40 hours in a workweek. Currently, that threshold is $23,660. This rule would not only have affected contractors; it would have affected nearly all employers. But, as a result of the court’s decision, the rules will not be taking effect on December 1, and any employee who satisfied the test for exemption from overtime before December 1 will continue to satisfy that test after that date under the same employment terms. (The decision is State of Nevada v. U.S. Department of Labor, Case No. 4:16-cv-00731 (E.D. Texas, Nov. 22, 2016.))
Now the “but.” Actually, two of them.
Some employers may not view this as good news, because they have already begun implementing the changes that were supposed to take place next week. Employers who want to undo those changes need to carefully review what they have told employees. At worst, such employers may have made binding promises to employees. At best, such employers may have an employee morale issue. There won’t be a one-size-fits-all solution to this.
Also, the fact that the new regulations were struck down does not mean that contractors and other employers have nothing to worry about. The decision could be reversed by the judge himself or on appeal. And, even with the current, relatively low threshold of $23,660 per year ($455 per week), many employers are wrongly classifying employees as exempt from overtime pay even though they don’t meet the law’s requirements. Often, the mistake stems from a belief that any employee who is salaried is “exempt.” That is not so. To be an exempt “white collar” employee, one must also meet one of the applicable duties tests: executive, administrative or professional. (There are other exemptions, too.) Another common mistake is misunderstanding the duties tests, or thinking that an employee is exempt if he or she is “important.” There is no “important employee” exemption. Likewise, there is no automatic exemption for highly-paid employees.
So, let out a sigh of relief, for now. Then, remind yourself that, new rules or no new rules, it is always a good time for employers to audit their compliance with wage and hour laws.