Action Item: As December quickly approaches, do not forget that the U.S. Department of Labor’s (“DOL”) revisions to the “White Collar Exemption” regulations under the Fair Labor Standards Act (“FLSA”) are set to take effect December 1, 2016—by design, before the new administration takes office. We have said it before, and we will say it again: it’s still not too late to act, and the time to plan for compliance is now.
If you are interested in the details about the revisions to the regulations, please see our summary here. Briefly, effective December 1, 2016, the DOL is implementing revised requirements for the White Collar Exemptions that double the minimum salary threshold to $47,476 (in addition to meeting the applicable duties test), and provide for automatic increases every three years beginning on January 1, 2020.
There are two lawsuits currently pending in federal court in Texas challenging the validity of the new regulations, one brought by a coalition of businesses and the other by 21 states. The lawsuit brought by the states requests that the court issue an injunction to stop the regulations from going into effect, and the court is holding a hearing on November 16 to make that decision. The business organizations in the other suit have requested expedited summary judgment (seeking a determination that the regulations were improperly implemented) that the court has said it will address before December 1. The states and businesses face an uphill battle, if for no other reason than the assigned judge is the only Obama appointee in that court. It is safe to predict that these legal efforts are unlikely to stop the implementation of the new rules on December 1 (though most employers hope that prediction is wrong).
You may also be aware of pending legislation in Congress seeking to delay or prevent enactment of the new rules. Any bill that makes it through before December 1 (or even before inauguration) faces a promised veto by President Obama. Employers are hoping for an ultimate rollback of the new rules when Donald Trump becomes the President. Many predict that, once Trump takes office, his administration will take steps to reverse or modify the new regulations; however, at this point, these new rules do not seem to be a priority for the new administration. More importantly, once the new rules go into effect on December 1, it will take more than an edict from President Trump to reverse them. In fact, the DOL likely would need to initiate another rule-making effort to reverse or revise the new rules. We do believe that the automatic salary increase every three years, which is included in the regulations, will ultimately be retracted or reversed. It is also possible that there could be the creation of a small business exception.
While the prospects of reversal or modification of the regulations are not completely outside the realm of possibility, keep in mind that nothing is likely to happen before December 1. So, practically speaking, for now, the safest bet for employers is to finalize and implement a compliance plan by December 1.