Federal Increase Due December 1, 2016 To Qualify Exempt-from-Overtime Employees

Effective December 1, 2016, the Federal Overtime Exemption Rule, “the Final Rule,” will raise the minimum salary amounts for certain workers to qualify for overtime exemption under the Fair Labor Standards Act (FLSA). See New Stricter Federal Requirements on Exemptions from Overtime, Employers Must Comply No Later than December 1, 2016 (May, 2016).

There are pending attempts to slow down or stop implementation of the Final Rule. In July, 2016, a member of Congress introduced H.R. 5813, the Overtime Reform and Enhancement Act (OREA), in July 2016 to phase in the higher minimum salary required for exemption over the next three years. See Not So Fast – Congressmember Seeks to Slow New Overtime Exemption Rule (August 2016). Congress has not passed the bill and it remains pending in Committee.

On September 20, 2016, 21 states and a business-interest group filed two federal lawsuits in the Eastern District of Texas challenging the Final Rule. They chose that district as it is known as a “rocket docket court,” normally moving cases along at relative lightning speed.

While a lame duck Congress could still pass H.R. 5813 after the November election, or the Texas court could issue an order these weeks preceding the December 1 deadline, companies cannot and should not wait to prepare.

The table below compares the current federal minimum salary requirements for otherwise qualified exempt employees with the new levels under the Final Rule. Depending on the state in which you operate, your current minimums may be higher, as shown in the column for California. If so, the new law would of course have a lesser impact than in other states.

To adopt and implement a workable plan for your company, it is good practice to list out all your exempt employees, comparing current salaries to Final Rule requirements. If the latter amount is drastically higher for any such worker, it would be a good idea to calculate what you would pay that person on an hourly rate plus overtime. Of course, no matter the decision, the company must ensure compliance with all legal requirements for the selected status.

For further information on the issues raised by these new regulations, please contact our attorneys, Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin

October 20, 2016.