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HR Alert: White Collar Exemption Preliminary Injunction

Yesterday, U. S. District Judge Amos Mazzant out of Texas issued a nationwide preliminary injunction against the Department of Labor’s (DOL) white collar exemption increase. The final rule to the Fair Labor Standards Act was issued May 18, 2016 to take effect December 1, 2016.  Raising the nation’s White Collar exemption salary threshold for the first time since 2004, from $455 per week/$23,660 to $913 per week.

The new standard salary level had been set to be equal to the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region. It would allow for automatic updates every three years, beginning January 1, 2020. These updates will be based upon the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region which is currently the South.

In consolidated lawsuits (Nevada v U.S. Department of Labor, 16-00731, U.S. District Court, Eastern District of Texas (Sherman) filed in September 2016, Attorney Generals from 21 states and a coalition of more than 50 business groups challenged the authority of the DOL to make the final rule.

Arguing that the DOL’s rule (1) created an undue burden and would force state and local governments and private business owners to increase exponentially their employment costs, in turn potentially draining state budgets causing irreparable injury to the extent of impacting governmental programs and services (2) asserting the DOL did not have the authority to set the statutory salary level automatic indexes every three years without allowing for public comment and (3) there would be an undue burden of added labor costs forcing employers to move full-time jobs to part-time. 

The Court concluded that the DOL did not have “the authority to utilize a salary-level test or an automatic updating mechanism under the Final Rule and it issued a nationwide preliminary injunction. “

This preliminary injunction is not final. Early predictors are though saying that given the Republican take-over of both houses of Congress and a Trump victory, the DOL may not be able to hold onto this rule.

How should employers move forward?

Employers have been planning and strategizing on the budgeting and staffing dilemmas brought about by the increase in the white collar exemption salary thresholds for months now. Discussions have been held with employees either providing notice of increases, reclassification of status or informing them they would receive overtime going forward.

Should employers go back to pre-December 1 pay and staffing conditions or stay with any implemented changes; truly an employee relations challenge.  What should an employer’s next step be?

Each decision will be unique to the employer business strategy. Employers should bring the key decision makers back to the table to plan out immediate next steps including developing a communication plan to those affected employees.

We will continue to follow this topic.

Bobbi Kloss

Director, HR Management Services

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