Future Remains Uncertain For New Overtime Pay Rule

FUTURE REMAINS UNCERTAIN FOR NEW OVERTIME PAY RULE


Actions to block a Department of Labor (DoL) regulation that would entitle an estimated 4.2 million more American workers to overtime pay (the Regulation) came too late for many employers, who moved to increase salaries or decrease work hours ahead of the Regulation’s scheduled December 1, 2016 effective date.  We previously reported on the Regulation https://www.banaslegal.net/news/2016/06/08/final-overtime-rules-announced-president-labor-department/ and  http://www.banaslegal.net/news/‌2016/‌01/27/new-overtime-pay-rules-white-collar-workers-horizon/, which would have increased from $23,660 to $47,476 the minimum salary an executive, administrative or professional employee (EAP Employee) must earn in order to be classified as “exempt” and not entitled to overtime pay (i.e. one and half times their regular hourly wage for each hour in excess of 40 hours worked in a single week). 

Last November, a federal court judge for the Eastern District of Texas issued a preliminary injunction that blocked the Regulation from taking effect.  file:///C:/Users/Jessica%20Hallmark/Downloads/‌416cv731b%‌20(2).pdf  Interestingly, the court made its order effective throughout the United States, and not just in Texas’s eastern district.  The court held that the Fair Labor Standards Act only authorizes the DoL to establish the duties of an EAP Employee, and the DoL exceeded its authority by setting a minimum salary level and stating that employees who earn less may not be classified as exempt EAP Employees, regardless of their duties.  The court clarified in a footnote that its ruling only applies to the Regulation, and not the DoL’s existing rule, which sets the minimum salary for EAP Employees at $23,660.  It reasoned that the current salary level was intentionally set low when it was first established by the DoL in 1949 in order to “screen out obviously non-exempt employees.”  However, “…this significant increase…creates essentially a de facto salary-only test.”

The district court order is currently on appeal to the fifth federal circuit.  However, in January the Trump White House acted to freeze all agency regulations pending review https://www.whitehouse.gov/the-press-office/2017/01/20/memorandum-heads-executive-departments‌‌‌-‌‌‌‌‌and-‌agencies, and thereafter the Department of Justice obtained an extension of the briefing schedule "to allow leadership personnel adequate time to consider the issues."  It remains to be seen whether the Trump administration will elect to continue defending the Regulation.  Stay tuned.

 

 

 

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