New York Employers Take Note: Federal Court Injunction Blocking the Federal Overtime Regulations Means Little in New York

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1 New York Employers Take Note: Federal Court Injunction Blocking the Federal Overtime Regulations Means Little in New York CLIENT ALERT November 30, 2016 Richard J. Reibstein Jessica Rothenberg PROPOSED NEW YORK REGULATIONS WILL NEARLY APPROACH THE NOW-ENJOINED FEDERAL SALARY THRESHOLDS AND THEN LEAPFROG THOSE AMOUNTS IN SUBSEQUENT YEARS. Reproduced with permission from Daily Labor Report (November 30, 2016). Copyright 2016 by The Bloomberg Bureau of National Affairs, Inc. ( ) As many employers have now heard, a Texas federal court issued a nationwide injunction on Nov. 22 blocking implementation of the new federal regulations regarding overtime eligibility that were scheduled to go into effect Dec. 1. THIS PUBLICATION MAY CONTAIN ATTORNEY ADVERTISING The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship. Please send address corrections to phinfo@pepperlaw.com Pepper Hamilton LLP. All Rights Reserved.

2 Employers around the country were revising their wage practices in response to the new regulations, which would have doubled the weekly wage threshold needed to treat salaried employees as exempt from overtime under the executive, professional and administrative exemptions even if they would otherwise have satisfied the duties test. The court found that the Department of Labor did not have the legal authority to raise the overtime wage threshold by means of a regulation. The old (and still valid) federal regulations require that executive, professional and administrative employees who meet the duties test of those exemptions be paid a salary of at least $455 per week, or $23,660 per year, to be exempt from the overtime requirements. The new (and now enjoined) regulations lifted that threshold for salaried employees to $913 per week, or $47,476 per year. News that the new federal regulations have been enjoined is of greatest significance to employers outside of New York, especially those that have already made, announced or contemplated changes in anticipation of the new regulations going into effect on Dec. 1. But for New York employers, the federal injunction means close to nothing. Why? The New York State Labor Department also proposed new regulations that aim to increase the threshold for salaried administrative and executive employees in New York to amounts relatively close to the now-enjoined federal regulations. If finalized, which appears to be highly likely, the regulations will take effect on Dec. 31, 2016, and increase the thresholds as below: $825 per week in New York City if the employee works for an employer with 11 or more employees $787 per week in New York City if the employee works for an employer with 10 or fewer employees $750 per week if the employee works for an employer in Nassau, Suffolk or Westchester County, and $ per week if the employee works for an employer in any other county in New York.

3 Further, those thresholds will increase each year, up to a maximum of $1,125 per week as of Dec. 31, 2018, for New York City employees working for employers with 11 or more employees; $1,125 per week as of Dec. 31, 2019, for New York City employees working for employers with 10 or fewer employees; $1,125 per week as of Dec. 31, 2021, for Nassau, Suffolk and Westchester County employees; and $ per week as of Dec. 31, 2020, for employees in all other counties. Below is a chart of those salary thresholds: NYC Employers of 11 or more employees 12/31/2016 $825 per week 12/31/2017 $975 per week 12/31/2018 $1,125 per week NYC Employers of 10 or fewer employees 12/31/2016 $787 per week 12/31/2017 $900 per week 12/31/2018 $1, per week 12/31/2019 $1,125 per week Nassau, Suffolk and Westchester County Employers 12/31/2016 $750 per week 12/31/2017 $825 per week 12/31/2018 $900 per week 12/31/2019 $975 per week 12/31/2020 $1,050 per week 12/31/2021 $1,125 per week

4 NY State Employers in All Other Counties 12/31/2016 $ per week 12/31/2017 $780 per week 12/31/2018 $832 per week 12/31/2019 $885 per week 12/31/2020 $ per week While the injunction pertaining to the federal regulations is a temporary measure, an appeal of the decision is unlikely to be heard and decided before the new Congress is sworn in and the Trump administration takes office. It is more likely than not that the incoming administration will propose new regulations and/or that the new Congress will pass a measure rescinding the regulations or suspending them, at least until an appellate court reviews the nationwide injunction. New York employers, however, will be required to follow the proposed New York State regulations once they become effective on Dec. 31, 2016 (if they become final, as expected). While the state regulations create salary thresholds for 2017 that are slightly lower than the federal salary thresholds would have been, some of the state thresholds will exceed the federal threshold in future years. For example, the 2018 state threshold for New York City employers of 11 or more employees will exceed the federal threshold. What should you do if you have taken or contemplated steps to comply with the nowenjoined federal regulations? Most employers will not roll back any changes already made or announced because of the negative implications for human resource management. But if you have merely contemplated changes but not yet announced them or put them into effect, there is no legal reason under federal law at the present time to place them into effect. But as noted above, the proposed New York regulations, to be effective Dec. 31, 2016, will nearly approach the now-enjoined federal salary thresholds and then leapfrog those amounts in subsequent years. Therefore, most New York City employers will have far fewer practical choices but to carry out their plans to comply with the now-enjoined federal regulations. Those in other counties may be able to delay these plans for at least a couple of years.

5 Public comments on the proposed New York regulations are open until Dec. 3, It is likely that fewer comments have been received so far because the now-enjoined federal regulations exceeded all of the New York State salary thresholds for On a related note, New York employers are reminded that New York is also increasing its minimum wage rates as set forth on the chart below, beginning on Dec. 31, General Minimum Wage Rate Schedule Location 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 NYC Employers - 11 or More Employees $11.00 $13.00 $15.00 NYC Employers - 10 or Fewer Employees $10.50 $12.00 $13.50 $15.00 Nassau, Suffolk & Westchester Counties $10.00 $11.00 $12.00 $13.00 $14.00 $15.00 Other Counties in New York $9.70 $10.40 $11.10 $11.80 $12.50 Starting in 2021, for other counties in New York, the annual increases will be published by the Commissioner of Labor on or before Oct. 1 until the rate reaches a $15 minimum wage. In the past, employers in New York used to feel comfortable following the federal wage and hour laws because the state s wage and hour laws followed suit in many respects. That era is gone. Now, New York is well ahead of the federal law in terms of minimum wage and overtime requirements. Employers in this state will need to remain informed and take heed. Berwyn Boston Detroit Harrisburg Los Angeles New York Orange County Philadelphia Pittsburgh Princeton Silicon Valley Washington Wilmington pepper.law