FLSA's Salary Increase on Hold
Put the brakes on salary increases mandated by the Department of Labor! Employers will not be required to pay salaried employees a minimum salary of $47,476 beginning December 1st. A Federal District Court has granted a preliminary injunction against the Department of Labor's implementation of FLSA regulations that would have mandated increases in salaries or a change to hourly status for millions of Americans.
Twenty one states and a business coalition filed a motion with the Federal District Court in Texas requesting an injunction against the increase in the salary level. They argued that the Department of Labor does not have the authority to utilize a salary-level test or an automatic salary increase mechanism. The court sided with the states. The court was also convinced that the states would be irreparably harmed unless the preliminary injunction was granted. State officials provided declarations stating that it would cost millions of dollars in the first year alone to comply with the salary rule provisions.
What happens next? We anticipate that this ruling will be appealed by the Department of Labor. The question is whether the Federal Court of Appeals will hear the case on an expedited basis. There is also uncertainty with what will happen once the new administration is in place regardless of whether this case is ramrodded through the Appellate Court or no action is taken before President Elect Trump's first day in office.
Looking into a glass ball, here are some of the possible outcomes. The new administration could direct the Department of Labor to do the following:
1.) If not already litigated with the Court of Appeals, move forward and litigate the matter arguing that the Department of Labor has the authority to change the salary test and implement an automatic increase mechanism (not likely);
2.) Withdraw the regulations if not implemented and implement new regulations providing for the same or different salary increase to be implemented in steps over a period of time with or without an automatic increasing mechanism.
3.) If litigated and implemented, direct the Department of Labor to propose new regulations returning the minimum to the current salary level of $23,660 a year, or to a level higher than the current rate but lower than $47,476.
We recommend keeping any planned salary increases on hold unless you have made the decision to provide an increase for reasons other than the new salary requirements. The basis for this opinion is that if the regulations do not go into effect, it will be very difficult to undo salary increases because of the adverse affect on employee moral. On the flipside, if the regulations go into effect, employers will almost certainly have a window to bring pay practices into compliance. If you have any questions, please contact Mark Bloom, Gary Johnson, Matt Elliott, Craig Patterson, or Doug Powers at (260)422-0800.