Update on Potential Changes to the Fair Labor Standards Act

November 23, 2016

The much publicized changes to the Fair Labor Standards Act have been enjoined by a federal court judge in Texas and may never take effect. In response to a lawsuit started by 21 states and more than 50 other business groups, the judge has blocked implementation of the new rules that – among other things – were to have required employers to pay at least $913 per week to maintain the exempt status (not entitled to overtime) for their otherwise qualified employees. For "highly compensated employees" the threshold was to increase from $100,000 to $134,004.The changes to the FLSA were scheduled to go into effect next Thursday, December 1.

We have been counseling our clients for months on how to implement these changes. Since they may never take effect in their current form, here's what you need to know:

  • It is not yet clear whether the government will appeal this decision and, if so, when a decision from the appellate court would be reached. The injunction will remain in place unless and until it is lifted by an appellate court. Likewise, there may be collateral litigations brought around the country that try to interpret, distinguish or "skirt" the impact of the current decision. So ignoring the regulations entirely does bring with it some risk.
  • If the ruling stands through the inauguration and the new administration does not pursue the matter, it will likely die on the vine and never take effect. It is, of course, uncertain how the new administration will approach its wage and hour policies, but it is highly unlikely that these regulations will become implemented in their present form.
  • Many of our clients have either implemented our previously recommended changes or have informed their employees about changes that are going to take effect.
  • Employers have three options: (1) maintain the current status quo and do nothing differently on December 1; (2) implement all planned changes irrespective of these new developments; or (3) implement some, but not all, of the changes. As the regulations impact different businesses in different ways, consideration should be given as to which one works for your company.
  • Partial implementation must be undertaken with great caution in order to avoid inadvertent violation of the existing law.
  • One thing is certain, employees who were told that they would be receiving a raise or having their hours/schedules changed need to be told promptly as to what the company is going to do.
  • New York employers must also remember to update their Wage Theft Prevention Act notices for all employees whose pay is going to be changing.
  • As important, there are changes taking effect to the New York Labor Law that are not impacted by this decision. Companies are urged to ensure they are compliant with the modifications to the State law.
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Drogin, Laurent S. Partner and Chair of Labor and Employment Practice and Co-Chair of Restrictive Covenant Practice Partner and Chair of Labor and Employment Practice and Co-Chair of Restrictive Covenant Practice 212.216.8016 VCard

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