NEW SALARY THRESHOLD FOR EXEMPT EMPLOYEES BLOCKED

In an unexpected ruling, a Federal Judge in Texas has blocked new FLSA Rules that were to take effect on December 1, 2016 that would have increased the minimum salary for employees to qualify as Exempt and would have extended overtime pay requirements to an estimated 4 million workers in the U.S.

Background – New FLSA Exempt Status Rules

In July of 2016, new rules for Exempt Status under the Fair Labor Standards Act (the “FLSA”) were published by the U.S. Department of Labor (DOL) based on a review process that began in 2014.  Among other changes, the new rules increased the minimum salary threshold for an Executive, Administrative, or Professional employee to be considered Exempt from overtime requirements. The threshold increase from $455 to $917 per week was scheduled to go into effect as of December 1, 2016.

Preliminary Injunction Blocks Implementation of Increase

On November 22, 2016 a Texas Federal Judge issued a preliminary injunction against the December 1 implementation of the new Fair Labor Standards Act (FLSA) Exempt minimum salary rules. While this unexpected development keeps the current weekly salary threshold at $455 per week, it does not change any of the Duties Tests, as they apply to the determination of Exempt status from the FLSA overtime regulations. The new rules are on hold pending further legal review.  Although the DOL has announced that it strongly disagrees with the court’s decision, what the next steps in this matter will be have not yet been decided.

State Minimum Salary Requirements:

The preliminary injunction filed by the Texas Judge does not affect actions by various states regarding setting minimum salary requirements for Exempt employees.

New York State is engaged in a process that is likely to result in state mandated increases to the Exempt salary threshold as of 12/31/16. Those increases are expected to be:

• New York City
  • Large employers (11 or more employees)—$825.00 per week ($42,900 annually) on and after 12/31/16
  • Small employers (10 or fewer employees)—$787.50 per week ($40,950 annually) on and after 12/31/16
• Employers in Nassau, Suffolk, and Westchester Counties—$750.00 per week ($39,000 annually) on and after 12/31/16
• Employers Outside of New York City, Nassau, Suffolk, and Westchester Counties—$727.50 per week ($37,830 annually) on and after 12/31/16
• California – Exempt Status Salary Minimum remains at the current $800 per week ($41,600 annually)

Salary Basis/Weekly Rate:

Clients are reminded that FLSA Exemptions require payment on a “Salary Basis” which requires, at a minimum, weekly pay with no deductions for days not worked.  In the Motion Picture industry in states other than California, a Day Rate can be used to meet the salary test.  California, however, requires a weekly salary with no deductions for days not worked to qualify as Exempt under its regulations (Day Rates for less than a week of work do not meet CA requirements).

Links & Further Information:

Information on the related Duties Tests and more details on salary requirements can be found at:

• Federal:  Click here for FLSA overtime rules
• California Regulations:  Click here for CA overtime rules
• Federal Motion Picture Industry Exemption: Click here for information on the Federal Motion Picture rules.  Please note that this Federal exemption does not apply in CA