The revised U.S. Department of Labor (DOL) regulations
which were set to take effect December 1 would have
changed the requirements for an employee to be considered
Exempt/Salaried (ineligible for overtime). Called the “White
Collar Exemptions,” the revisions provided that employees
could not be considered Exempt unless their weekly
salary was $913 or more, a huge increase over the current
requirement of $455 per week.
Employers who do not have any Exempt employees, or
whose Exempt employees are already earning more than
$913 per week, did not have to make any changes to comply
with the new law. All other employers have been diligently
analyzing their Exempt employees who earn less than $913
per week and making necessary adjustments to the weekly
pay, changing the employee classification, or changing job
duties and hours, etc. in an effort to comply.
At the seminars I presented this fall on the Exempt employee
law changes, I mentioned that there was a lawsuit filed in
September by twenty-one states to stop the implementation
of these revised regulations. We were awaiting the decision
on the emergency motion for preliminary injunction that
was also filed. The judge overseeing the case granted
the injunction on November 22nd. By granting the
preliminary injunction, the judge has ruled that the status
quo (meaning the law as it presently exists, without the
salary minimum increases) be maintained pending a trial on
the merits. Even though only twenty one states were part of
the lawsuit, the judge ruled that the injunction applies to the
entire United States.
While the status quo will be maintained for the immediate,
if not the indefinite future (depending on the outcome of the
case), the question being asked now by employers is “What
do we need to do now?”
For employers who have not yet changed anything, the
answer is “nothing.” Because the law is not taking effect as
planned on December 1st, employers who have not already
implemented any changes can choose to do nothing for now.
This would only change if the case is later adjudicated and
the DOL regulations are upheld, which could take years, not
months. By virtue of the preliminary injunction having been
granted, a DOL victory is far from certain.
For employers who have already proactively taken steps
to increase Exempt employees’ salaries to meet the $913
figure or have already reclassified employees as hourly paid,
rearranged workloads, etc., they have a number of choices.
The employer can either continue to honor the changes,
rescind them in total, or implement some of the anticipated
changes while rescinding others.
To simplify the analysis, I have divided presently Exempt
employees into four categories. Those categories—and
current recommendations for each—are below:
1) Exempt employees who presently earn $47,476 ($913/
week) or more
For Exempt employees who already earn $47,476/year
($913/week), no changes were needed and no new action
is required now.
2) Exempt employees who earn $45,000 – $47,475
In the seminars, I suggested that all Exempt employees
who earn $45,000 but less than $47,476 should be given
the necessary salary increase to keep them Exempt —
since the number of weekly time-and-one-half overtime
hours needed to actually earn the amount of the wage
difference is quite low.
If you have already taken or promised this action, I
suggest that the wage increases given to those workers in
this Category 2 be maintained. While an employer could
reduce the affected Category 2 employees’ wages back to
the previous level, doing so may have a negative impact
on morale that might outweigh any employer savings.
That said, the employer may wish simply to maintain the
salary increase but delay or limit subsequent scheduled
increases.
3) Exempt employees who earn between $40,000 and
$44,999
Before the injunction, I suggested that employers with
Exempt employees in this category look at each employee individually and decide what action to take regarding the
employee’s classification status. That same analysis should
now be undertaken once again to decide whether to keep
or modify whatever changes were made for employees in
this category. Regarding those Category 3 employees who
were converted to hourly, the employer can simply restore
the employee to Exempt status and return to previous
work hours and obligations. For Category 3 employees
whose salaries were increased to the new minimum, the
employer will need to make a determination on a caseby-case basis whether to proceed with the raised salary
or reduce it back to its previous level, or do something in
between.
4) Exempt employees who earn between $23,660 (the
current Exempt minimum) and $39,999.
At the seminars, I suggested that any Exempt employees
who earn less than $40,000 (category 4) should likely
be converted to hourly since the necessary pay increase
to keep them Exempt would likely be too expensive for
most employers, and paying overtime would actually be
more cost-effective. Assuming the employer is satisfied
that the employee otherwise meets the “duties” test
requirements under the Act, employees in this category
who were converted to hourly may be returned to Exempt
status. This should occur before December 1st so that no
(additional) overtime hours are accrued.
Until the DOL’s case is adjudicated, employers should not
assume the present injunction will continue indefinitely.
If and when the DOL’s increases are upheld, employers
will need to be in a position to implement expeditiously
whatever changes are needed regarding their then-affected
Exempt employees. We will keep you updated as new
information becomes available. In the meantime, please feel
free to contact me with any questions about best practices
for your particular company or organization. FT
RESPONSIVE SOLUTIONS
Two simple words that explain our commitment to you.
Being responsive is a critical element in building a strong
attorney-client relationship. Whether you are a new or
existing client, we’ll be quick to respond to your needs with
the knowledge necessary to find solutions to your legal
concerns.
