United States: Federal Overtime Rule Injunction Calls For State-Level Attention

Last Updated: December 29 2016
Article by Sebastian Chilco and Rachel Fendell Satinsky

Many businesses let out a sigh of relief after a federal judge issued a preliminary injunction1 halting the U.S. Department of Labor's (DOL) final rule increasing the minimum pay requirements for exempt executive, administrative, and professional employees. The preliminary injunction was issued about a week before the rule was scheduled to take effect on December 1, 2016. The preliminary injunction effectively maintains the status quo under the federal Fair Labor Standards Act (FLSA), which requires that these employees be paid at least $455 per week to maintain their exemption from the FLSA's minimum wage and overtime requirements. However, under the halted final rule, the federal minimum weekly salary required for white collar employees would have increased from $455 to $913 per week (or from $23,660 to $47,476 annually), exceeding any applicable state rate. In other words, if employers went ahead with salary adjustments in anticipation of the (now enjoined) federal rule, they likely would be in compliance with corresponding state laws. However, if the same employers decide to wait and see what transpires with the final rule before making wage adjustments, they should consider whether current salary levels for their exempt employees satisfy state law requirements.

Additionally, because many state and local minimum wage rates steadily have increased – and will continue to do so – employers should be mindful of jurisdictions in which white collar employees are entitled to be paid the state's minimum wage (which is not required under federal law).2

Pay Requirements that Exceed $455 per Week

Under the DOL's final rule, the minimum pay requirement for white collar employees was to be $913 per week, or $47,476 annually. Because these requirements would have exceeded any equivalent state rate, paying the minimum federal rate essentially would have satisfied an employer's pay obligations nationwide. But given the injunction against the regulations, for now, the $455 per week ($23,660 per year) standard will continue to apply; thus, employers must ensure the pay provided to executive, administrative, and/or professional employees meets or exceeds the baseline requirement under federal and state law.

Employers in Alaska and California are not strangers to dual compliance because both states' laws have required pay exceeding the federal rate for some time. Laws in these jurisdictions require white collar employees be paid at least two times the state minimum wage for a 40-hour workweek, and these states have steadily increased their minimum wages. There are other states that link exempt employee pay to the state minimum wage—for example, Colorado, Maine, and Oregon. However, only recently has this become an issue for employers—previously, the state weekly pay requirement was less than the federal $455/week pay requirement. Notably, all three states have scheduled multi-year minimum wage increases – through 2020 for Colorado and Maine, and through 2023 for Oregon – and eventually their minimum wages will adjust annually, too. As a result, the 2017 Maine weekly rate will exceed federal requirements; Colorado's weekly rate might exceed the FLSA standard in 2017; and, depending on an employer's location in Oregon, the state weekly rate may surpass $455 per week in either 2018 or 2020.

Like in Alaska and California, employers in New York must also manage higher pay requirements. But, compliance for New York employers now has become more challenging due to an April 2016 law that amended the state minimum wage law to create four new rates based upon an employee's work location and/or the size of an employer's workforce. This law also schedules minimum wage increases into the 2020s. Moreover, in late October 2016, the New York State Department of Labor proposed amendments to its wage orders that assign different minimum pay requirements for white collar employees, depending on which minimum wage rate applies.3 Although these final wage orders have not been published to date, they are expected to be published before the state minimum wage rates – and proposed wage order changes – are scheduled to take effect on December 31, 2016.

Finally, before 2004, federal law applied two tests for each exemption: a "long" test with more strenuous duties requirements, and a "short" test with a greater minimum pay requirement. Some states, however, including Connecticut and Iowa, did not eliminate their two-test system, and their short tests require a minimum pay amount that exceeds the FLSA standard.

Some State Minimum Wage Laws Cover White Collar Employees

Under the FLSA, executive, administrative, and professional employees are exempt from the law's minimum wage and overtime requirements. However, numerous states' laws only exempt these employees from their overtime laws, not their minimum wage laws. Accordingly, in these locations, employees are entitled to receive their state's minimum wage. This has not been a major concern for employers because many of these states' rates were at, or only slightly above, the federal $7.25/hour minimum wage, so an employee would need to work a considerable number of hours in a particular week before a violation hypothetically could occur. Although this remains true in many states that do not exempt white collar employees from the minimum wage, other states (and cities and counties) have set their minimum wage rates well above the federal rate or have built-in multi-year minimum wage increases followed by an annual adjustment—e.g., Massachusetts; New Jersey, and Chicago, Illinois. Therefore, in these locations, an executive, administrative, or professional employee's pay must meet the minimum salary and/or fee payment requirement and equal at least the minimum wage for all hours worked in a workweek.

Conclusion

Now that employers have some breathing room with respect to the delayed implementation of the federal white collar overtime requirements, they should consider using this opportunity to examine state wage and hour law to ensure continued compliance with local requirements.

Footnotes

1. See Sean McCrory, Maury Baskin, Robert Friedman, and Tammy McCutchen, Federal Court Blocks New Overtime Rule, Littler ASAP (Nov. 23, 2016).

2. For a discussion about minimum wage rates in 2017, see Josh Kirkpatrick and Sebastian Chilco, The Minimum Wage in 2017: A Coast-to-Coast Compliance Challenge, Littler Insight (Nov. 18, 2016).

3. See Bruce Millman and Emma Fursland, Proposed Amendment to New York State Wage Orders Set To Substantially Raise Salary Requirements For Exempt Employees, Littler Insight (Nov. 1, 2016).

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.

Authors
Sebastian Chilco
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.