On November 22nd, U.S. district Judge Amos Mazzant in Sherman, Texas put the brakes on the new FLSA rule issued by the Labor Department scheduled to take effect on December 1st. Judge Mazzant agreed with the 21 states and the U.S. Chamber of Commerce that the Labor Department does not have the power to decide which workers can be classified as exempt (salaried) based only on salary level. As a manager, leader or business owner it’s likely the previously proposed FLSA changes to increase the salary level for employees who can be considered exempt to $47,500 led you to make some tough decisions and have even tougher conversations. So what does this mean for you and your employees?
Essentially as a manager, leader or business owner you have three choices. If you revamped your salaries and classifications in preparation for December 1st you can keep those changes, you can hold off on making any changes, or you can tell your team that you’re reverting to your old compensation/ salary structure.
The overarching issue at hand is that no one knows how this is going to turn out. According to an article by Fortune.com published on November 23rd, it’s possible that the Labor Department could drop the appeal of Judge Mazzant’s ruling after President-elect Donald Trump takes office in January, The Labor Department could appeal to the 5th U.S. Circuit Court of appeals, or if the rule is upheld through the legal challenges Congress could still pass legislation to dismantle it. No one knows exactly what will happen, and that is what has left employers and employees frustrated.
Speculation suggests that some form of the rule will likely take effect, but what salary threshold and the other implications that may take effect are just that, speculations. Additionally, it could be months before any actual outcome occurs.
Here are four questions you might consider asking yourself to determine how to proceed based on the new ruling:
- How did my employees take the first set of changes? Can they handle it if we revert to the old salary/ compensation guidelines or release a new set of changes?
- Will my employees feel like this is a demotion if I go back to the old salary/compensation structure?
- Are the financial implications of the changes made for the proposed December 1st changes so staggering that you have to go back to the pre-December 1st compensation structure for the benefit of your employees?
- Will another change be too much for your staff to take?
Your answers to the four questions above will likely guide how you implement or delay implementing the changes you prepared to make in advance of December 1st. The pure size of your organization, or how much you invested to insure your employees were classified correctly in anticipation of the changes may also dictate how you decide to move forward.
Whatever you decide, be sure to communicate with your employees clearly about how the delay in the new rule will affect them. Even if it won’t affect them, you’ll want to communicate that as well.
The good news? If you’ve been scrambling to figure out how to deal with the impending FLSA changes, Judge Mazzant just granted you at least a temporary extension. We’ll stay tuned on how this case proceeds, and report back on if or how any new rulings could affect you and your employees.