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Wage-Hour Update: Latest on Salary-Exempt Status Litigation

In our blog entry dated November 23, 2016, Coolidge Wall announced that a federal judge in Texas had issued an injunction halting the Department of Labor's new wage and hour regulations from being implemented on December 1, 2016, as anticipated. These amended regulations purported to increase the threshold salary requirement for most exempt positions from $455 to $913 per week, which would have impacted more than an estimated four million workers throughout the country. Many employers were poised to implement changes in compliance with the amendments, and others had already implemented such changes in advance of the effective date.

Since our last report, the DOL has appealed the injunction decision to the Fifth Circuit Court of Appeals, and that appeal remains pending and unresolved. So what is the current status of the wage-hour changes affecting salaried-exempt employees, and what happens next?

First and foremost, it is clear that nothing will be decided by the appellate court until after President-Elect Trump takes office on January 20, 2017, so the injunction stopping the amendments will remain in place until then. That's because, although the appellate court is expediting the schedule, the court's docket shows that briefing on the appeal won't be concluded until February 7, 2017, at the earliest. Oral argument will take place sometime after that, with a decision to follow even later - assuming the appeal is not withdrawn by that time.

But the DOL under a new presidential administration could actually choose to withdraw its appeal, which would leave the old wage-hour system in place indefinitely. This possibility becomes even more likely if Trump's nominee for the Secretary of Labor position, Andrew Puzder, is confirmed and takes office. Mr. Puzder is currently the CEO of the fast food restaurant chains Carl's Jr. and Hardees, and he is on record as opposing past employee-friendly attempts to modify wage and hour regulations. Therefore, it is possible that the DOL could simply reverse course and dismiss its own appeal before a final order.

Alternatively, Congress could intervene and undo the amended regulations. Specifically, Congress may have this authority under the Congressional Review Act. This statute gives Congress the ability to essentially overrule certain executive regulations within 60 session days after their effective date. Now that the election has swung control of both houses of Congress and the Presidency to Republicans, this may be a rare occasion for the act to be employed successfully.

So, what's an employer's best advice given all this uncertainty? Companies should consider both the legal issues and the potential effect on employee morale before changing whatever practice they had in place as of December 1, 2016. While some employers would like to see the amendments permanently shelved, if the regulations are ultimately upheld by the courts, it is also feasible that the amendments would be applied retroactively, subjecting employers to liability for not having already complied with them, notwithstanding the federal injunction.

For employers who have already implemented changes, they should consider not only the legal issues, but also the abundant morale issues associated with making another change. For example, employees who have been raised to the new salary threshold solely because of the anticipated amendments will be reluctant to give up their new compensation. This will be a difficult tightrope for many employers to walk in the coming months.

The facts of each employer's situation are different. For further advice as to your particular company's needs, please contact a member of the Coolidge Wall labor and employment department.​   
                                               -- David P. Pierce and Marc L. Fleischauer

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