Election Impact on FLSA Overtime Regulation Changes
Labor & Employment Alert
We have been getting a number of calls from clients asking what impact last week’s election results will have on the Department of Labor’s (DOL) overtime regulations scheduled to take effect on December 1, 2016 – and more importantly, whether employers can now take a “wait and see” approach to the regulations and assume that the new Republican administration and Congress will act to overturn and stop the regulations from taking effect.
As most employers are aware, the Final Rule updating the overtime regulations alters the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt from overtime pay. Specifically, the Final Rule:
- Sets the standard salary level at $913 per week; $47,476 annually (10% of which may now be satisfied by nondiscretionary bonuses and commission payments);
- Sets the total annual compensation requirement for highly compensated employees to the annual equivalent of $134,004; and
- Provides for automatic updates to the salary and compensation levels every three years.
While there are a number of possible ways the regulations could be stopped from taking effect, none at this point are clear or certain enough to justify halting efforts to ensure compliance, and last weeks’ election results will have no immediate impact. As such, employers should continue to take measures necessary to ensure compliance by December 1.
One glimmer of hope for short-term relief is related to a lawsuit pending in the Eastern District of Texas, which challenges the rules on a number of grounds. A hearing on a motion for injunctive relief is scheduled for November 16, 2016, and it is possible that the judge in that case could grant the motion, which would temporarily halt implementation of the regulations, before December 1. However, litigation outcomes are always difficult to predict and the judge in that case is an Obama appointee, so that outcome and the timing of any relief is far from certain.
There is also the potential for legislative action, specifically a pending bill that would overrule the regulations by statute. Given the tight timeframe prior to the regulations taking effect, however, along with President Obama’s continuing veto power, this is unlikely to provide relief before the December 1 deadline.
Other possibilities for scuttling the regulations will be viable only in 2017, and primarily after Inauguration Day. One is the Congressional Review Act, which allows Congress to review and disapprove agency regulations under certain circumstances. At this point it is unclear whether the DOL overtime regulations will fall within the required timeframe to allow such a review, but if it does, Congress could pass and President Trump could sign a resolution after he takes office to effectively void the regulations. Alternatively, the new administration could direct the DOL to revise the rules in 2017, a much slower process that would be unlikely to provide relief until later in 2017 or possibly 2018.
As such, while there are a number of potential avenues for overturning the DOL’s regulations, as of today, employers should continue to move forward to take the measures necessary to ensure compliance by December 1, 2016, keeping in mind that in Pennsylvania, notice of any changes to pay rates must be provided to employees on or before the payday prior to any such change taking effect.
