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New Federal Overtime Rule On Hold: “What Do We Do Now?”

By on November 28, 2016 in Policy with 0 Comments

New employee overtime rules slated to take effect on December 1, 2016, have been placed on a nationwide temporary “hold” pending a final Court hearing on the matter. The new Fair Labor Standards Act regulation, which would have doubled the minimum salary threshold for those not eligible for overtime pay, has been delayed by a Federal Court in Texas. The question is: “What do we do now?”

What Happened? A Federal Court in Texas placed a nationwide “hold” on the regulation scheduled to take effect on December 1st requiring employers to make hard decisions on whether to double the pay for certain salaried employees (exempt from overtime) or pay them overtime for more than 40 hours worked in a week. In enjoining the implementation and enforcement of the new rule, the Court held that Federal law does not grant the Department of Labor the authority to use a salary-level test or an automatic updating mechanism (for minimum salaries). In doing so, the Court held that “[w]ith the Final Rule, the Department exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test” and that “[i]f Congress intended the salary requirement to supplant the duties test, then Congress, and not the Department, should make that change.”

What did the Regulation Actually Require?  It would have raised the minimum salary for every salaried employee not paid for overtime hours (approximately 4.2 Million nationwide) from $23,660 to $47,476 and also provided for automatic increases every three years beginning in January, 2020.

What Does the “Hold” Mean for Your Organization?   It means that you do not have to raise the “exempt” employees’ salaries beginning on December 1st (or pay them overtime) even if they work more than 40 hours. However, this may be a temporary delay since the Court issued only a temporary order until the issues can be decided after a full hearing and final decision.

What Do We Do if We Already Gave or Promised Our Salaried Employees Raises? This is a very sensitive topic since it may not only involve legal issues, but may affect your organization’s morale and finances.  In the first instance, you may want to consult with your legal counsel regarding your options which may include leaving those decisions in place (paying the raises or beginning to pay formerly “exempt” employees overtime) or advising employees that the raises (and/or overtime pay) will be postponed pending the final legal decisions on these issues. Other options may be available based on the nature of your business, your organizational structure, and any actions you have already taken to implement the FLSA regulation.

What is Our Recommendation?  First, consider the impact of any collective bargaining or employment agreement that may be in place. Second, and most important, and whatever path you choose, your reaction to the “hold” should be done with great care and after seeking advice from your legal team.

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Carmen Saginario Jr., Esq.

About the Author

About the Author:

Carmen Saginario Jr., Esq. is Co-Chair of Capehart Scatchard’s Labor & Employment Group. Mr. Saginario focuses his practice on employment litigation and counseling. He regularly counsels clients on litigation avoidance, personnel policies and procedures including those associated with the Americans with Disabilities Act, Family and Medical Leave Act and Fair Labor Standards Act, employment discipline, layoffs and other terminations. Mr. Saginario directs and participates in internal investigations involving claims of harassment, policy violations, ethics and other employment issues. He also appears on behalf of private and public sector clients before the judiciary as well as State and Federal administrative agencies (EEOC, N.J. Division on Civil Rights, etc.). Mr. Saginario is also experienced in representing clients before arbitrators and mediators. He has negotiated numerous public collective negotiations agreements (e.g., law enforcement, public works, etc.). Mr. Saginario has been certified by the National Football League Players Association (NFLPA) as a Contract Advisor (player agent).

Mr. Saginario also regularly represents clients in administrative and complex civil litigation matters and also supervises Capehart Scatchard’s Corporate Compliance Group which counsels and assists public and private sector entities on establishing and implementing legal and ethics compliance programs.

Mr. Saginario serves as counsel for governmental and other entities (including counties, municipalities, school boards, and fire districts) and individuals with respect to laws governing public entities, as well as educational, procurement, environmental, transportation, and public safety issues.

Mr. Saginario served as a Deputy Attorney General for the State of New Jersey and Assistant Counsel to Governor Thomas H. Kean, has served as Vice Chair and Director of Administration for the Cinnaminson Sewerage Authority, and Vice Chair and Treasurer of the New Jersey Health Care Facilities Financing Authority.

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