OVERTIME RULE BLOCKED: WHAT SHOULD EMPLOYERS DO NOW?
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December 1, 2016 came and went, and the new federal overtime rule did not go into effect. A federal judge in Texas granted a nationwide preliminary injunction on November 22, 2016, blocking implementation of the rule. The Department of Labor filed a notice of expedited appeal to the Fifth Circuit, which was granted, and the incoming administration will also, likely factor in to determining the fate of the rule.
These developments have landed employers in an unexpected state of limbo: Many employers had already notified employees of pending pay and classification changes in anticipation of the rule going into effect, and some employers had already implemented changes in accordance with the rule. In light of the preliminary injunction, some employers have decided to forego making changes for the time being, while others, for various business and risk-related reasons, have decided to move forward with changes notwithstanding (particularly where employers had already notified employees).
Whether or not the federal overtime rule goes into effect, New York and California employers need to remain mindful of state exempt salary minimums. Currently in New York, employers must pay white collar workers at least $35,100 annually for them to be eligible to be exempt from overtime. Proposed legislation, which is expected to shortly become law, would increase this minimum depending on employer size and geographic location in increments between December 31, 2016 and December 31, 2021. For New York City employers with 11 or more employees specifically, the new minimum exempt salary would go up to $42,900 annually as of December 31, 2016, up to $50,700 annually as of December 31, 2017, and up to $58,500 as of December 31, 2018.
Similarly, in California, employers must currently pay exempt white collar workers at least $41,600 annually. For California employers with 26 or more employees, the mandatory minimum increases to $43,680 as of January 1, 2017, and will increase incrementally up to $62,400 by January 1, 2022. For California employers with 25 or fewer employees, the mandatory minimum increases to $43,680 as of January 1, 2018, and will increase incrementally to $62,400 as of January 1, 2023.
In deciding next steps for your organization, consider: (i) whether potentially impacted employees meet the FLSA’s duties test; (ii) impact on employee morale; (iii) state exempt salary minimums; and (iv) related business risks.
Jessica Golden Cortes is a partner in the Labor & Employment Practice Group at Davis & Gilbert LLP. She can be reached at jcortes@dglaw.com or 212.468.4808.