by Susan Prince, JD, MSL
The U.S. Department of Labor (DOL), headed by new Secretary of Labor Alexander Acosta, has decided not to defend the overtime rules finalized under the Obama administration. Instead, the DOL will seek to begin a new rulemaking process, likely with a lower salary threshold for overtime exemptions.
A federal district court temporarily blocked the DOL’s final overtime rules on November 22, 2016, just days before it was scheduled to take effect. At the request of 21 states, the U.S. District Court for the Eastern District of Texas granted an emergency injunction halting the new regulations. The DOL’s motion to stop the lawsuit was denied on January 3, 2017.
The reply brief notes that when it enjoined the final overtime rules, “the district court reasoned that the salary-level component of this three-part test is unlawful.” By contrast, the DOL argues that some sort of salary level should be allowed.
Acosta has indicated that the increase in the salary level under the final regulations would have been too drastic a change for employers and that a lower salary threshold may be effective in classifying exempt and nonexempt employees. The DOL’s reply brief states:
Although [the] plaintiffs defend the district court’s broad reasoning, they offer no basis to call into question a regulatory test that has been in place since the [Fair Labor Standards Act’s (FLSA)] inception. . . . This Court should simply lift the cloud created by the district court’s broad reasoning, which would call into question any salary-level test adopted by the Department.
RFI signals new rulemaking process
The DOL has submitted a Request for Information (RFI) regarding the final overtime rules to the Office of Information and Regulatory Affairs for review. An RFI is an optional step used by governmental agencies when drafting rules in order to obtain public input on whether a new rule or changes to an existing rule are warranted. In this case, the RFI begins a new rulemaking process on the overtime rules and the salary threshold.
The final regulations would have required employers to pay overtime to employees earning less than $913 per week ($47,476 annually) beginning December 1, 2016. DOL regulatory changes would have raised the threshold for highly compensated employees from $100,000 to $134,004 per year as of December 1, 2016. Beginning January 1, 2020, both the standard salary threshold and the salary level for highly compensated employees would have been automatically updated every three years.
That means that until further action, the minimum salary threshold for the white-collar exemptions will remain at $455 a week, where it has been since 2004. The salary threshold for the highly compensated employee exemption will remain at $100,000 per year.
The RFI gives employers, employees, political parties, nonprofit organizations, labor unions, and trade organizations the opportunity to provide input on the final overtime rules, explain what they think should change, and state whether there should be changes at all. The DOL will likely receive comments on the costs and difficulties for employers to implement large salary threshold increases, the effect on employers that actually implemented the $913-per-week threshold in anticipation of the final rules, how the impact of a high salary threshold varies in different geographic areas around the country, and how some industries are hit much harder than others.
Susan E. Prince, J.D., M.S.L., is a legal editor for BLR’s HR and employment law publications. She has over 15 years of experience as an attorney and a writer in the HR field and has published numerous articles on a variety of HR and employment topics, including compensation, benefits, workers’ compensation, discrimination, work-life issues, termination, and military leave. She also served as an expert on several audio conferences discussing the 2004 changes to federal regulations under the FLSA. Before starting her career in publishing, Prince practiced law for several years in the insurance industry and served as president of a retail sales business. She received her law degree from Vermont Law School.