Judge Halts Enforcement of Overtime Regulations

Stop the presses? Maybe! A federal judge in Texas issued an injunction which temporarily halted the enforcement of the new FLSA overtime regulations. That means that employees properly classified as exempt under the current regulations (i.e., who satisfy BOTH the salary and duties tests) but whose salary did not reach the $47,476 threshold can remain classified as “exempt” (for now) and do not need to be paid overtime for hours over 40 in a workweek. It also means that the “highly compensated employee” exemption remains at $100,000. There is certain to be more to come on this topic, but for now, employers might be able to relax a bit. However…

Don’t Exhale Yet! During the hoopla that occurred over the last 6+ months, many employers discovered that some of their employees were improperly classified even without the changes. In most cases, those employees meet the salary basis threshold (currently $23,660), but do not meet the equally-important “duties” test. The injunction DOES NOT affect those employees. They remain improperly classified because they do not meet the “duties” test. Employers that do not reclassify those employees as “non-exempt” continue to be exposed to liability for both straight time and overtime for all hours over 40 in a workweek. In addition, employers can be on the hook for penalties and attorney fees (both yours and the employees’). The lookback period is two or three years, so the potential cost is quite high. Companies caught in this bind should contact employment counsel to discuss the best strategy for converting the employees while minimizing exposure to the company.


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