Date: 18/10/2017
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DOL Overtime Rule Declared Invalid

DOL Overtime Rule Declared Invalid

As a follow up to a notice dated July 29, 2014: Just in time for Labor Day, a federal judge in Texas put an end to the Obama-era Department of Labor overtime rule tracked closely by business owners for several years. We have asked our advisor of such matters to comment on the change.

To refresh your memory, in May of 2016, the DOL published new regulations that raised the minimum salary level needed to qualify for a white collar exemption from the overtime compensation requirements of the Fair Labor Standards Act (“FLSA”) from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). Over the summer of 2016 and with an uncertain political climate, many business owners took steps to analyze the effects of the change on their business and put execution plans in place. Then, in September of 2016, two lawsuits were filed, one on behalf of 21 states, the other by the U.S. Chamber of Commerce, challenging the regulation change and arguing that the DOL exceeded its authority in establishing the revised regulations. According to the U.S. Chamber of Commerce, the rule “would have reduced workplace flexibility, remote electronic access to work, and opportunities for career advancement.”

The overtime rule litigation followed several unsuccessful attempts to legislatively alter the rule. As a result, many, myself included, doubted whether the lawsuits, which were consolidated and assigned to Judge Amos Mazzant, a President Obama appointee, would have an impact. And, yet, just two days after the Nov. 22, 2016, Presidential election, and only a few days before the December 1st effective date, Judge Mazzant issued a temporary injunction blocking the rules implementation on Dec. 1. According to the Judge, the salary level set under the new rule was too high for exemption.

In the meantime, the Trump administration weighed in on the overtime rule following the institution of Alexander Acosta as Secretary of Labor. Secretary Acosta noted in his confirmation hearing that the rule was a “very large revision” that needed to be looked at closely. With no support from the new Administration and given the temporary injunction, last week’s result, a final invalidation of the rule, was not surprising. Although an appeals court is still examining the propriety of the initial temporary injunction, the lower court Judge’s ruling that the DOL lacked the authority to issue the overtime rule’s dramatic increase to pay requirements is likely the final word. The Trump administration has already indicated an intent to reexamine the overtime rule with a lower salary threshold that the 50% increase originally proposed. While additional court action could be taken, it is unlikely.

What does this mean for business owners? The FLSA’s white collar exemption tests stand and, more specifically, the salary level requirement remains at $455 per week. Employers should stay up to speed on any further developments by the Trump administration to alter these requirements and continue to ensure its compensation schemes don’t run afoul of federal law. Of all litigation, claims under the FLSA are increasingly common. For additional information, please contact Rich Miles, Managing Member, CAPSTONE Business Advisors, LLC, at rich.miles@capstonebusinessadvisors.com or Jennifer Lankford, Employment Law Attorney with Thompson Burton, PLLC, at jennifer@thompsonburton.com.