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Update regarding FLSA Overtime Rules

On Tuesday, November 22nd, just 10 days before the effective date, a federal district court in Texas blocked the implementation of the Department of Labor's (DOL) new overtime rules. These new regulations would have increased the minimum salary level for employees who qualified to be classified as exempt from overtime from $23,660 to $47,476 per year. The judicial decision, a response to a lawsuit filed by over 20 States in October, affirmed the question of whether the DOL had the authority, without Congressional action, to raise the minimum salary threshold and leaves most employees and businesses wondering what to do next. AEM recognizes that, while this ruling may be a positive move for businesses, many of you have already taken significant measures to ensure that your organizations would be compliant on December 1st, 2016. With the uncertainty of when or even if the regulation will ever take effect, businesses will have some important issues to consider:

1. Does my organization even have anything that they need to do by the December 1st deadline? 

The quick answer is no. The minimum salary will remain at $23,660 until further notice. That said, many employers, in light of the regulations, took a closer look at their exempt and non-exempt employee classifications and were electing to move certain employees to an hourly basis due to their inability to meet the professional exemptions. It is very important to understand that the "Duties Test" rules remain the same so if your employee doesn't meet the qualifications to be considered exempt from overtime, they should still be reclassified.

2. Does the ruling effectively defeat the DOL Regulation? 

No. The overtime rules could still become effective later. The Texas ruling simply removes the effective date for now.

3. What should our organization do if we've already made the salary and/or wage changes effective? 

This is a question that each employer will need to assess individually. Leaders should consider the full effect of reversing salary increases, which would be extremely unpopular and difficult, but could postpone hourly reclassifications for employees who qualify for one of the professional exemptions.
Overall, while this may be a welcome reprieve for businesses, it comes with its share of quick and necessary employer responses. As you move through this process, please don't hesitate to contact AEM, or our new HR Services and Advisory group, AEM Workforce Solutions, should you have any specific questions or concerns.

Leah Davis, CPA, is President of AEM Workforce Solutions. She operated her own firm, providing outsourced Human Resources and payroll support for 9 years before joining Abdo, Eick & Meyers.She has extensive experience in Human Resource Managment, Regulatory Compliance, Employee Benefit Plans (including the Affordable Care Act), Workers Compensation, and Payroll and Employee Compensation. You can reach Leah at 507.524.2347 or at leah.davis@aemws.com.