caution

By now, employers know that on November 22, 2016, federal court Judge Amos Mazzant in Texas issued a preliminary injunction that has blocked – temporarily – the implementation of the revised white collar overtime regulations issued by the Department of Labor (DOL) earlier this year. Those regulations, which have been the focus of concern, controversy, and downright panic, were set to become effective on December 1, 2016.

The judge’s granting of the preliminary injunction, which was premised on his finding that the legal challenges to the new regulations have a substantial likelihood of success on the merits, means that pending further appeal/review and until a final ruling is entered, the existing regulations will remain in place. There is no date set for a final hearing on the issue.

Obviously, this has created a real dilemma for employers, who spent recent weeks and months getting up-to-speed on implementing the changes required by the new regulations. Where do they go from here? Here are a few of the most frequently asked questions, and the responses based on currently available information:

  1. What is the next step in the injunction process?

The injunction can (and most likely will) be appealed, and could, in addition, become the subject of an emergency motion for stay of the injunction pending that appeal. If such an emergency motion is granted, the preliminary injunction would be lifted, and the regulations would proceed, with the December 1 implementation date in place.

An additional twist is that any appeal taken now may not reach a final conclusion, because the incoming administration could drop the appeal after January 20, 2017 if the issue has not been fully decided before the inauguration. In that instance, the DOL’s rules never will be implemented . . . at least in their current form.

  1. If the injunction ultimately is vacated, will the new DOL rules be applied retroactively to overtime that was worked after December 1?

If the injunction ultimately is vacated (and the new regulations are put back on the table to be implemented, effective on the original December 1 implementation date), it is an open question whether employers can be liable for the time between December 1, 2016 and the date of that act. It is prudent to plan for claims of that nature, and therefore to keep track of overtime hours worked by individuals whose classifications would change from exempt to non-exempt under the new regulations.

  1. What are other employers doing?

Most employers who raised salaries to the new minimum threshold will leave those raises intact. Rescinding the raises now will likely create a significant morale issue. Conversely, most employers who have not yet announced such changes are putting them on hold until a determinative outcome has been reached by the courts. Many employers are in the middle. That is, changes to salary levels to assure that managers stay exempt have been announced but not yet implemented. Most employers in this category are notifying employees that the changes now are on hold. 

  1. What – and how – should we tell employees?

Any announcement will depend upon where the company is in the implementation process, including what changes have been announced to employees, and what steps have been taken to this point. Here is sample language that would be appropriate for employers putting implementation plans on “hold” for the time being:

As you know, the Department of Labor’s new regulations on who should be paid overtime and who should not were scheduled to go into effect on December 1, 2016. As a result, the company made plans to reclassify your position from exempt to non-exempt effective by that date. However, a federal district court judge recently halted enforcement of those new regulations, which may affect that re-classification. Therefore, plans regarding reclassification of jobs now are on hold pending resolution of the legal issues. In the interim and until a final resolution, you will be paid as you always have been paid. During the coming weeks, we will (with your help and input) keep track of your working hours and will determine pay revisions, if any, when a final legal determination is made by the courts. Please contact your HR manager with questions that you have.

  1. What if some workers whose jobs were planned for reclassification to non-exempt need to be reclassified anyway, regardless of the DOL’s new rules. Should we reclassify them?

Some employers have decided to make classification changes to individuals who DO NOT perform exempt duties, and are using this opportunity to assure compliance with basic FLSA classification requirements. In that instance, Meg Alli in our Detriot office has suggested language like this:

We notified you previously that you would become overtime eligible effective December 1, 2016. Despite recent legal rulings in Texas of which you may have become aware, we are writing to confirm that we have not changed our direction or course. As of December 1, you will be eligible for overtime after working over 40 hours in a week [or 8 in a day if state law requires]. You also will be expected to keep track of your working hours each day and timely report them to [the designated person in the designated way]. We value your commitment to our Company. Moving forward with our changes is the right thing to do and recognizes your extra work on behalf of the Company.

  1. What is the overall advice being provided to companies at this point?

In summary:

  • If changes already have been implemented, it is more practical and less disruptive to leave them in place and continue to monitor the situation for possible future action.
  • If changes have not been implemented (even if previously announced), everything can be put temporarily on hold; but
  • Record hours for the employees who were going to be reclassified, in case that data is needed later; and in either instance,
  • Evaluate what to tell employees and notify them quickly, as state law pay notification requirements may come into play.

This is a circumstance in which management, legal, and human resources should work carefully and in concert to assure that actions are carefully considered and planned before being implemented.