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Federal Court Strikes Down DOL’s New Overtime Rule
September 27, 2017
On September 4, 2017, a federal court in Texas struck down regulations enacted in 2016 by the Department of Labor (DOL) that would have increased the minimum annual salary threshold for overtime-exempt employees under the Fair Labor Standards Act (FLSA) and markedly expanded the class of workers eligible for overtime pay.
The FLSA’s current overtime rule exempts employees on the basis of (1) salary and (2) job responsibilities. The DOL’s new rule would have required employers to pay overtime to most salaried workers who earn less than $47,476 annually, a considerable increase from the current annual salary limit of $23,660. The rule also called for periodic increases to the salary threshold. Challengers of the rule argued that it raised the minimum salary threshold so high that it made an employee’s job responsibilities irrelevant. The court agreed. In blocking the rule, it held that the DOL improperly focused on salaries rather than job descriptions when determining whether a worker should be eligible for overtime pay, noting that the increase “would essentially make an employee’s duties, functions, or tasks irrelevant if the employee’s salary falls below the new minimum salary level.” The court ultimately concluded that the DOL’s rule, as presented, was contrary to both the plain language of the FLSA and Congress’s intent where it “makes overtime status depend predominately on a minimum salary level, thereby supplanting an analysis of an employee’s job duties,” and that the DOL had “exceeded its authority and gone too far.” Notably, the court did not hold that the DOL may never raise the salary threshold. It merely held that raising it so high that it effectively nullified the job responsibilities test was impermissible (the court indicated that an adjustment based on inflation might be permissible).
Though the ruling is subject to appeal, the DOL’s rule will not take effect for the time being. Therefore, existing overtime regulations (those from 2004) will continue to apply and the $23,660 salary threshold will remain in effect.
The DOL has indicated that it will be issuing new regulations and it is probable that it will again seek to raise the salary threshold, though likely not as aggressively. Employers should continue to focus on correctly categorizing employees as exempt or non-exempt under the current regulations and seek guidance from a member of our firm if need be.
Further, the DOL has issued a request for information, which affords employers an opportunity to submit comments and suggestions. We encourage our clients to take full advantage of this opportunity.
If you have any questions about the application of this news to your organization's particular situation, please contact Valerie Samuels or Catherine Lombardo or any other attorney in our Employment Group.
This Alert is provided for information purposes only, and does not constitute legal advice. According to Mass. SJC Rule 3:07, this material may be considered advertising. ©2017. Posternak Blankstein & Lund LLP. All rights reserved.