The Regulations

As we all know by now, Department of Labor’s (DOL) new regulations regarding the “white-collar” exemptions to overtime go into effect on December 1. These regulations raise the weekly salary requirement for the executive, administrative, and professional exemptions, as well as the annual salary requirement for the highly compensated employee exemption. The new regulations also call for automatic increases every three years tied to surveys of compensation levels at the time.

Two new lawsuits just filed in September in Texas challenge the new regulations. Whether they will be successful in striking down any of the regulations and when remains to be seen.

Lawsuit # 1

The first lawsuit was filed on behalf of states – public employers – including Alabama, Mississippi, and Texas. The basis of the lawsuit is that the imposition of the new rules on the states violates the principle of separation of federal and state governments. The lawsuit further alleges that DOL failed to follow proper rule-making procedures in formulating the regulations, especially as regards to the “indexing” process that will cause the salary levels to go up every three years. The lawsuit seeks temporary relief which might include delaying the effective date of the changes beyond December 1.

Lawsuit # 2

The second lawsuit is similar, except that it was filed by private organizations such as the U.S. Chamber of Commerce and many trade organizations. These private plaintiffs cannot argue, as the states can, that the regulations violate the separation of federal and state governments, but the other arguments are similar. The private-entity case mainly argues that DOL did not follow proper procedures, especially as regards to the indexing. Interestingly, this case was filed in the exact same court in Sherman, Texas, and both cases now appear to be assigned to the same judge.

What to Do

As of now, all of us should have plans in place as to how to address the new salary thresholds. Those options, as we have discussed previously, include raising salaries, converting salaried employees to hourly, avoiding overtime, hiring part-time workers, and using the fluctuating work week method of overtime, among others. We do not recommend changing your new plans as of yet. While it is possible that a federal court order could delay implementation of the new regulations, that may not happen quickly. Even if it does, there likely will be a quick appeal. There is a possibility that the parties could negotiate a delayed implementation while the lawsuits work themselves out, but we do not believe that any of us should count on that either.

We will keep you posted if there are any quick developments.