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Book Closes on Obama-Era Overtime Rule

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It has taken nearly a year and a half, but it finally appears that the Fair Labor Standards Act (“FLSA”) regulations on the “white collar” overtime exemptions will not go into effect.

As you may recall, the proposed regulations, which were issued by the U.S. Department of Labor (“DOL”) in May 2016, would have raised the required salary threshold for the exemptions from $455 per week to $913 per week. In late November 2016, days before the regulations were to go into effect, a federal district court in Texas entered a nationwide preliminary injunction that, in effect, hit the “pause button.”  

The DOL appealed this decision and subsequently received several extensions of time in which to file its reply brief with the appeals court so as “to allow incoming leadership personnel adequate time to consider the issues” or whether to continue the appeal at all. In its reply brief, which was filed in June 2017, the DOL asked the appeals court to reverse the district court and reaffirm the DOL’s ability to establish a salary level test but not address the validity of the $913 weekly threshold set by the rule.

The appeals court will not have to address that issue, however, as the district court judge recently struck down the regulations and entered summary judgment in favor of the business groups who challenged them.  The judge ruled that by setting the salary threshold where it did, the DOL effectively eliminated the exemptions’ duties test and exceeded its authority.  The judge did note, however, that he was not ruling on the DOL’s authority to set a salary level test for the exemptions.  Soon after this ruling, the appeals court granted the DOL’s unopposed motion to dismiss the appeal.  It is therefore unlikely that the DOL will appeal the district court’s ruling.

So, after all that, where do we go from here?  The answer appears to be a new set of proposed regulations that result from the administrative rulemaking process.  The DOL signaled its intention to institute this process several months ago when Secretary of Labor Alexander Acosta stated that the DOL would likely issue a Request for Information (“RFI”) regarding the regulations and, in particular, the salary level.  On July 26, the DOL published the RFI, which allows the public to provide information that will aid the DOL in formulating a proposal to revise the overtime regulations.  Notably, the RFI “solicits feedback on questions related to the salary level test, the duties test, varying cost-of-living across different parts of the U.S., inclusion of non-discretionary bonuses and incentive payment to satisfy a portion of the salary level, the salary test for highly compensated employees, and automatic updating of the salary levels.”  The public has until September 25, 2017 to respond to the RFI.

There are several takeaways for employers.  The first is that the $913 weekly salary level for the proposed “white collar” exemptions will not go into effect.  The second is that the weekly salary level will eventually rise through rulemaking, but to a level that should be much lower than the level set by the Obama-era proposed rule.  We will be sure to update you on any additional developments on this issue as they arise.  For questions about this or any other labor and employment topic, please do not hesitate to contact a member of our Labor and Employment Department.