This week’s blog post gives readers a preview of our next Walcheske & Luzi LLC Workplace (Dough)Nuts & Bolts Breakfast Series seminar topic on the upcoming Fair Labor Standards Act overtime exemption changes. Be sure sign up and join us October 20, 2016, for a full summary on the changes your workplace needs to be prepared for on December 1, 2016.
As many readers know from prior updates, the federal Department of Labor passed new regulations that affect whether an employee qualifies for exemption from overtime under the Fair Labor Standards Act. The most significant change is the salary level increase from $455 per week ($23,600 annually) to $913 per week ($47,476 annually), which is subject to automatic indexation every three years. The change was widely viewed as a steep, sudden increase to which employers were ill prepared to accommodate in their business costs.
Some employers may be tempted to see hope in the news last week that Texas, along with 21 other states, started a federal court lawsuit against the Department of Labor challenging the new overtime regulations. The States’ lawsuit essentially makes three arguments against the regulations: (1) the regulations violate the Fair Labor Standards Act in doubling the salary level threshold; (2) the automatic indexing change every three years violates notice and comment requirements for administrative regulations; and (3) the regulations unfairly burden States that will inevitably have to pay overtime to State employees. The U.S. Chamber of Commerce also recently brought litigation against the Department of Labor making similar arguments.
However, an employer’s best interests may be to comply with the law and wait for the results of this litigation. The plaintiffs in each lawsuit have tough arguments to make to overcome the overtime regulations for several reasons. Significantly, Congress, in passing the Fair Labor Standards Act, granted the Department of Labor the power to pass regulations defining the exemptions. Moreover, the Department of Labor complied with legal requirements to publish notice of the proposed regulation on July 6, 2015, and to take comments, which were received through September 4, 2015. Whether anyone likes it or not, the procedural requirements seem to met with respect to the salary level increase. Though the plaintiffs may have a stronger argument with respect to automatically indexing this level every three years, it seems difficult to foresee a court finding the regulations to be wholly unconstitutional or unlawful.
Any employer failing to comply with the regulations also risks much in the event the Texas and U.S. Chamber of Commerce lawsuits are not successful. Damages under the Fair Labor Standards Act include not just the unpaid overtime, but liquidated (double) damages, and attorneys’ fees and costs. Thus, what may be a relatively small amount of overtime can easily grow to a large award with these other available damages.
For more information, join us October 20, 2016!