Accuchex Blog

CA Labor Laws, Exempt Overtime, And The Final Rule

Posted by Tristan Ruhland on Jan 3, 2017 9:00:00 AM

California employers face increasingly difficult compliance requirements with CA labor laws. In addition, federal rules and regulations add to the complexity.

ca-labor-laws-exempt-overtime-and-the-final-rule 

Earlier last year, on May 18, 2016, the Department of Labor (DOL) released amendments to existing white-collar exemption regulations that had been in effect since 2004. The new change, known as "The Final Rule”, will more than double the current minimum of $455 minimum to be $913 per week.

While this was touted by the administration and DOL officials as a boon to workers, it was opposed by a number of employer groups and other organizations.

In addition to upping the minimum weekly amount to classify as an exempt worker, the Final Rule will increase the “highly compensated employee” exemption threshold from the current $100,000 to $134,004 annually. Also, beginning in the year 2020, the Final Rule automatically updates the salary threshold levels every three years.

The Final Rule Was to go into Effect December 1, 2016. 

The Final Rule had been scheduled to take effect on December 1, 2016 and would have impacted 400,000 workers who previously were not entitled to overtime pay in California. But a federal judge has put the rule on hold which makes the issue of exempt overtime uncertain. 

When the DOL enacted this policy over six months ago it provided employers with a six-month grace period to determine how they would respond to the new salary levels. Essentially, employers were faced with the decision to either raise salaries of their exempt employees above the threshold (an increase of $23,816 per employee, which would be a pay increase of over 50%, or to simply reclassify those employees as non-exempt.

Opponents of the new rule believe that most employers likely will choose to reclassify employees to avoid overtime pay.

Then, on September 20, 2016, separate legal challenges were filed in the Eastern District of Texas. These were brought by a coalition of business organizations and by a group of 21 states, both seeking to invalidate the Final Rule. The two groups requested injunctive relief that would essentially block the effective date of December 1, 2016.

Two months later, on November 22, 2016, a little more than a week before the scheduled start date of the Final Rule, U.S. District Judge Amos Mazzant III issued a nationwide preliminary injunction that blocked the Department of Labor’s implementation of the Final Rule. 

Employers Must Now "Wait and See" on the Final Rule 

This preliminary injunction which, imposed by a Texas federal district court, has prevented the Labor Department’s new overtime rule from taking effect, prompting the department to file a brief with a federal appeals court on December 15, 2016.

The department’s brief challenges the district court’s reasons for the injunction on three main points:

1. A disagreement over whether the Fair Labor Standards Act (FSLA) allows the use of a salary test for the white-collar overtime exemption. The DOL claims that it does.

2. The DOL states that the district court did not offer a plausible basis to overturn the final rule’s salary level, which the department claims is consistent with salary levels adopted for over 75 years.

3. The brief also contends that the district court could not issue a nationwide injunction affecting other employers that were not party to the lawsuit and that did not seek the injunction.

In addition, the department noted that the 21 states bringing the lawsuit had failed to demonstrate “irreparable harm”, which is a prerequisite to a preliminary injunction.

The appeals court had already granted an expedited hearing of the request to remove the injunction on December 8th.  Next in the sequence of legal steps is all briefs in the case are to be filed with the court no later than January 31, 2016. Once this is complete, the oral arguments will take place and, hopefully, the court will rule on the appeal after oral arguments are heard.

Most experts are suggesting that, for now, employers err on the side of caution and prepare for the eventual implementation of the Final Rule.

Getting the Expert HR Compliance Help You Need

An updated compliance strategy will help your organization meet its obligations, while providing accuracy and timeliness. So take time to understand the laws, prioritize employee and manager changes, and maintain accurate record keeping. 

Another key step in maintaining HR compliance and increasing your company's cost-effectiveness is to consider outsourcing. A professional payroll management and workforce solutions provider such as Accuchex can offer much-needed help with Human Resources needs and questions.

Accuchex is a full spectrum Payroll Management Services provider offering expertise in Time Management, Insurance and Retirement issues, as well.

california-labor-law-guide

Topics: ca labor laws, overtime pay, employee classification, DOL, fsla, exempt employees

Subscribe to the Accuchex Blog