Last week, in an eagerly-awaited ruling, a Texas Federal Court issued a nationwide injunction that stops the Department of Labor’s widely publicized changes to overtime rules from going into effect on December 1. For New York employers, this ruling increases the significance of recent proposed increases to the State’s minimum salary threshold for exempt employees.
As most employers are aware, the new Federal rules increased the minimum salary level for white collar exemptions to $913 per week. The court, in granting last week’s injunction, concluded that the Department of Labor likely exceeded its rulemaking authority in increasing the salary threshold. The injunction is only a preliminary determination. Many observers, though, view the ruling as a practical and permanent end to the new regulations. A final determination is unlikely before the January 2017 presidential inauguration. The incoming administration appears less likely than the current administration to support and defend the rules. The Department of Labor, with new appointees from President-Elect Trump, could issue different regulations with a smaller salary increase or rescind the regulations in their entirety, returning to the prior regulations.
The possible invalidity of the Federal overtime regulations increases the significance of the increases proposed by the New York State Department of Labor last month. The proposed New York increases were, for 2017, less than the proposed increase under the Federal Regulations, so many employers may have overlooked them. The proposed New York increases would progressively raise the current minimum salary threshold of $675 per week ($35,100 annually) to $1,125 per week ($58,500 annually) for some employers. As with the recent changes to the New York State minimum wage, the timing and amount of increases will vary depending on whether the employer is large (11 or more employees) or small, its location (New York City; Nassau, Suffolk, and Westchester Counties; and the rest of New York). If the increases are approved, the increases will go into effect on December 31, 2016. The minimum salary threshold for large New York City employers will become $825.00 per week ($42,900 annually) for large New York City employers, $787.50 per week ($40,950 annually) for small New York City employers, $750 per week ($39,000 annually) for employers in Nassau, Suffolk, and Westchester Counties, and $727.50 per week ($37,830 annually) per week for New York employers outside of those areas. The salary thresholds will increase annually through 2021 under the proposed regulations.
Employers that already have made, or announced, changes to their employees’ duties or salary to account for the new Federal rules must now consider how to move forward. While rescinding salary increases or changing duties, if implemented properly, can be lawful options, they will likely have significant employee relations issues and employers will also need to be mindful of the likely increases to New York State’s minimum salary requirement. If you have any questions about the changes to the overtime rules, please feel free to contact the author of this article or your Clifton Budd & DeMaria attorney.