If you are a business owner you are probably aware of the new Fair Labor Standards Act ("FLSA") regulations that were set to go into effect on December 1, 2016.  Due to an injunction entered by a Federal Court in Texas the regulations will not go into effect on that date.  Currently, to be exempt from overtime, a three part test is applied by the Department of Labor. Employees must be paid a predetermined fixed salary ("Salary Basis Test"), in excess of the minimum salary required ("Salary Level Test"), and be involved in executive, administrative or professional duties ("Duties Test").  The new regulations were set to increase the minimum weekly wage in the Salary Basis Test to $913 per week ($47,476 per year) from $455 per week ($23,660 per year).  The expected raise in the Salary Level Test was expected to make many administrative employees suddenly non-exempt from overtime which could increase liability for employers.

In entering the injunction the Court found that the Department of Labor may have exceeded their authority in having a Salary Basis Test as the Salary Basis Test is not mentioned in the statutes. If the States bringing this action are successful in this argument then the Court could find that the Salary Basis Test should not be part of the regulations at all.


Considering how close we are to a change in administrations, and probably a change in employment policies, the injunction is the prudent move by the Court.  Considering how low the Salary Basis Test is prior to the expected increase, whether the Court ultimately removes the Salary Basis Test or not will probably not have any real practical impact.


IF YOU HAVE ALREADY MADE A CHANGE to your employment practices to comply with the new regulations, you will also be in compliance with the prior rules and will not need to make any changes to comply.  If you want to revert back to your previous arrangement with your employees you should use caution in revoking a benefit that you may have already conferred.  While this may be legally possible, generally employees react poorly to losing a benefit.

IF YOU HAVE SCHEDULED A CHANGE for December 1, 2016, you do not have to implement that change.  Your employees may have an expectation of the change if you have already discussed it with them and dealing with their expectations can be an issue.  It is likely that the Department of Labor regulations will not survive as currently constructed whether it is action of the Court or the new administration.  That being said, if the regulations were to survive, then you must be prepared to make a change upon a final judgement in the lawsuit.

IF YOU HAVE NOT MADE ANY CHANGE then you are no longer in a rush to do so.  That being said, the three part test discussed above is still in place and you may need to assess whether your employment practices are in compliance with the current overtime rules.  Please feel free to contact Nathan Hull at Hull & Chandler, P.A. if you have concerns with your compliance with the current overtime rules.