United States: Employers Have Something To Be Thankful For As Judge Halts December 1st Effective Date Of DOL FLSA Final Rule: Here Is What Employers Need To Know And Do Now

In the last six months, nearly every business was sent into panic mode and forced to quickly adjust to the Department of Labor’s (DOL) Fair Labor Standards Act (FLSA) Final Rule that was set to take effect December 1, 2016.

The Final Rule was significant as it required many exempt employees’ earning between $23,660 and $47,475 to be raised to $47,476, at a minimum. This impacted various positions ranging from managerial positions, accounting, payroll, human resources, and many more.

What happened to the December 1, 2016 Effective Date?

On Tuesday, November 22, 2016, a federal judge issued a nationwide injunction halting the implementation of the Final Rule. This means that employers really do have something to be thankful for this Thanksgiving and can breathe a short sigh of relief because December 1, 2016 is no longer anything they have to be concerned about.

What happens to the Final Rule now? Do employers have to worry about it?

The Final Rule was challenged in two lawsuits and on numerous issues. The way the judge chose to decide the case and grant the nationwide preliminary injunction was the best result for employers as it essentially gutted the Final Rule and said it went against the FLSA itself. The alternative would have been to allow the Final Rule to go forward, but implement the salary change through a phase-in process.

Here is what can happen next:

Option 1: The DOL can appeal the injunction to the Fifth Circuit, which will not likely issue an opinion until 2017. If the Fifth Circuit reverses, the injunction would be lifted, and the case would return to the judge that granted the preliminary injunction to be fully litigated. This flows into Option 2.

Option 2: The DOL can choose not to appeal, and the case would be litigated before the judge who granted the preliminary injunction. Given that the judge already granted a preliminary injunction and determined that there was substantial likelihood that the plaintiffs who challenged the Final Rule would succeed on the merits, it is likely that the judge would grant a permanent injunction.

Option 3: A lame-duck Congress could come up with a compromise bill for President Obama’s signature. While the Final Rule had support from both sides on the aisle, it is unclear whether the two sides would be able to get a compromised bill to President Obama before the expiration of his term.

Option 4: The issue remains and President Elect Trump addresses it after his confirmation. Given President Elect Trump’s pro-business background, it is unlikely that he, or the Republican House or Senate would allow this initiative, which has been seen as bad for business.

For employers that have made reorganization plans, now what?

Here is where we really get into what employers need to know. There are two camps: (1) employers that already implemented their workforces to comply with the Final Rule; and (2) employers that were set to comply between now and December 1, 2016. Most of the changes employers implemented or were getting ready to implement were some combination of: (1) converting salaried employees to hourly; (2) converting salaried employees to salaried/non-exempt; (3) raising exempt employees’ salaries; (4) limiting overtime opportunities; (5) hiring more part-time employees; and (d) layoffs and other business-related cutbacks.

Regardless of what camp an employer falls into, all employers fall into the “we spent a lot of money to figure this out, upset a lot of employees in changing their pay/classification, and now we did not have to do any of that!” camp. While the standby line has always been, “that’s the cost of doing business,” employers will need to balance the cost savings of a do-over for employees whose salaries were raised and those employees whose morale was lowered when they went from salaried to hourly or were set to be.

For employers that already made changes to their workforce, the key question is whether it makes sense to return to the pre-reorganization structure. Going back may confuse employees, frustrate employees, and re-open now-corrected FLSA misclassification issues that were resolved during the reorganization. Employers are free to do what they want, but to the extent they decide to revert to the old structure, they should be sure to think about doing the following:

  • Properly provide employees with notice of any change in pay.
  • Review audit materials and FLSA misclassification issues that were uncovered and resolved during the reorganization. Any reversion should stop short of including these positions or changes that were resolved because the employer would expose itself to FLSA misclassification violations. This means that a partial reversion is the answer; i.e., some positions revert back to pre-reorganization days and some do not.
  • Do not forget about the emotional impact on employees who were given a raise that may be rescinded and those that were excited about the possibility of overtime that will not be eligible.

These are also the key concerns for employers on the cusp of implementing changes. The same considerations should be explored in determining what parts, if any, the employer decides should move forward.

What other things should employers be thinking about?

First, employers should be happy about this because it gives them more control over their labor budgets and bottom line.

It also gives them more flexibility to implement any changes they desire. Specifically, the now-defunct December 1, 2016 deadline was a Thursday and 11 months into the calendar year. That made little sense to any employer’s payroll or tax planning purposes. Now, employers can implement changes on a schedule that makes sense for them. It could be January 1, 2017 and the beginning of a new calendar year, a new fiscal year from the employer, or some other date that makes sense for the employer.

An employer’s preparation work was not in vain. In reviewing their workforces to affect the Final Rule, many employers discovered significant FLSA errors, and not just misclassification errors. Many employers discovered other significant FLSA errors, such as, travel time errors, tip sharing/pooling errors, off-the-clock time errors, clock in/out errors, etc. Finding and correcting these errors is significant because it reduces the employer’s potential FLSA liability. Employers should keep these changes because they were for the overall better good of the company. These changes might include reclassifying employees that were determined improperly classified as exempt.

The bottom line is that this is extremely good news for employers. While employers do not have to effect salary changes by December 1, 2016, they likely discovered a lot of changes they should continue to make. While the exercise of reviewing the workforce and setting up such significant changes seems like an exercise in futility given there is no requirement for immediate change now, employers should have a better sense of where they are compliance-wise with the FLSA and move forward with other changes that may have been necessary to keep them on the right side of the FLSA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions