Overtime Update

What happened to the Obama administration’s proposed new rule on employee eligibility for overtime pay?  Seven months into the Trump administration, do we know what to expect?  Recent events provide some clarity on these questions.

A year ago, many employers were preparing to implement a new rule adopted by the U.S. Department of Labor, under which employees would have to earn more than $913.00 per week to be eligible for most exemptions from overtime requirements.  The rule, which was scheduled to take effect December 1, 2016, was forcing employers to consider whether to reclassify employees from FLSA-exempt to overtime-eligible, restructure their jobs, or give them significant raises.  It was estimated that 4 million employees would be affected.

Then, on November 22, 2016, a U.S. district court in Texas entered an injunction blocking implementation of the new rule.  Significantly, the court did not just find that the new salary threshold was too high; it held that the Department of Labor, in exercising its authority to “define and delimit” the overtime exemptions, lacked the power to set any salary threshold for exempt status. (The court reached this conclusion despite the fact that the DOL’s exemption  regulations have included a salary threshold for over 70 years, without objection from the courts in any of the myriad cases that have considered various aspects of those regulations.)  See our previous post on the decision here.

The DOL appealed from the district court’s decision, and sought an expedited schedule in hopes of getting an appellate court ruling before the impending change in administrations.  But January 20, 2017, came before briefing was completed, and over the next several months the new administration sought and received three successive extensions of time to file its reply brief in support of the appeal, while it sorted out what position it would take.

Meanwhile, the new Secretary of Labor, Alexander Acosta, went on the public record with comments that the overtime salary threshold ought to be increased, but not to the level set in the proposed rule.  He was quoted as favoring a threshold in the low $30,000 range.

Secretary Acosta’s comments suggested something of a dilemma for the new administration – while it was satisfied with the result reached by the court in Texas (enjoining implementation of the Obama administration’s rule), the Secretary appeared not to want to concede that the Department of Labor lacked authority to set any threshold at all, as the district court had held.  Other members of the administration, generally favoring less regulation and more limited government, may well have supported the district court’s reasoning in that regard.

The more moderate views appear to have prevailed, as on June 30th the DOL filed a brief in the Fifth Circuit Court of Appeals defending its authority to set a minimum salary to qualify for exempt status, but not seeking to reinstate the Obama administration’s 2016 rule.  Instead, the DOL has announced that it will conduct a new rulemaking process to determine what the exempt salary threshold should be.

So for the foreseeable future the threshold remains at $455/week ($475/week in Connecticut).  The public will have another opportunity for input as a new proposed rule is developed.  Perhaps an attempt will be made to address the vagueness of the duties tests for the white-collar exemptions as well as the salary threshold; the Obama DOL elected not to propose any changes to those regulations.

It will also be interesting to see whether the Trump administration de-emphasizes enforcement of the overtime rules generally.  The proposed DOL budget for 2017-18 is significantly less than the current year’s budget, and while we don’t know specifically what enforcement efforts are slated for the most significant cuts, wage and hour enforcement isn’t especially popular with those in the Trump administration who favor significantly less regulation and smaller government.  It would not be a surprise to see the DOL take a less aggressive approach in this area.  Of course, whatever happens in Washington, Connecticut employers should expect the State DOL to continue vigorous enforcement of wage/hour laws.