Most of you by now have heard that the FLSA changes on the salary level to be and exempt employee scheduled to go into effect on December 1 have been stopped, at least temporarily, by a Federal judge in Texas. This will have different meaning to different parties, depending on where they were in the process. Let’s explore that.
Have not made any changes yet
The good news is, for now you do not have to make any changes. You just keep paying people the way you have been doing it up to this time. There is no need at this time to reclassify employees as nonexempt based on the judge’s ruling. According to Marty Heller of Freeman, Mathis & Gary, LLP, the judge in question, Amos L. Mazzant III, issued a temporary injunction based on his judgement that the actions of the Department of Labor exceeded the authority issued to them by Congress. It is likely he will make this a permanent injunction that will then have to be appealed. That appeal in all likelihood will not occur until after President-Elect Trump is sworn in.
Your employees may have heard that changes were coming, either because you announced it or because of the press. You can let them know the change has been stopped due to legal reasons and things are status quo until further notice.
However, if in doing your due diligence in preparation for the change, you discovered that some employees were misclassified as exempt then you need to go ahead and use this opportunity to properly classify them as nonexempt. Start paying them correctly and avoid future problems.
Just Made changes this past week
Many attorneys were telling companies that it might be good to make changes the week of Thanksgiving because it was, for most companies, a lighter week of work and little to no overtime would have been accrued. They also suggested that since December 1 was in the middle of a week that pay records would be easier to handle. You can now back off those changes for employees that were exempt based on their duties test but not the salary test.
However, if in the process of doing your due diligence on all of the potential employees to be affected you discovered that some employees were not properly classified under the duties test you will want to leave them alone and keep the change in place. Employees who do not meet the duties test do need to be classified as nonexempt employees and be paid overtime when they work more than 40 hours in the week.
Made the change months ago
Well you jumped the gun a little bit. You have a decision to make. Do you want to keep things the way they are or back out of the changes made? Whichever you decide to do make sure you are communicating to employees. Decide what is best for all concerned. If it is very disruptive you may opt to not change anything. But if it has been more expensive than you anticipated then you may want to fall back to your previous classification. Make sure that if you do that you are only changing people who are unarguably exempt by the duties test, they just fell short on the salary test. If there is any question that they may be nonexempt you are on tenuous ground if you take away their overtime opportunity.
Regardless of which of these situations you find yourself in, it is important to communicate with your employees. The proposed changes have been in every news media available and they are likely to have read about it even if you have not said anything to them.