June 14th, 2018 •
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The End of the Obama DOL’s Overtime Rules?
As employers well remember, in March 2015 then-President Obama directed the Department of Labor to update and modernize the Fair Labor Standard Act’s overtime regulations. On May 18, 2016, the Obama DOL released its final rule with an effective date of December 1, 2016. Perhaps the most drastic change was the more than double increase of the salary level from $455 per week ($23,660 annually) to $913 per week ($47,476 annually) with automatic increases every three years. This announcement left many employers scrambling to determine how they would comply with the Obama DOL’s changes before December 1, 2016.
However, in October 2016, 21 states and 55 business groups filed suit in Texas federal district court for a preliminary injunction to stop enforcement of the new rules. The states and business groups argued that the DOL exceeded its statutory authority by establishing such a large increase in the salary level. Less than two weeks before implementation, the District Court granted a preliminary injunction to maintain the status quo while it determined whether the DOL exceeded its authority, and the DOL appealed the preliminary injunction.
Aside from the change in presidential administrations, not much happened on this matter until August 31, 2017, when the District Court granted summary judgment in favor of the states and business groups. The Court agreed that the DOL exceeded its authority in setting such a high salary basis level thereby effectively eliminating the duties test for overtime exceptions. The Court also concluded that the automatic salary increase every three years was unlawful.
For employers, this is a final ruling rather than a temporary one like the preliminary injunction issued in November 2016. The Justice Department has announced that it would no longer defend the Obama DOL’s rule and even dropped its appeal of the preliminary injunction. Therefore, the existing overtime regulations remain in effect. In particular, the salary level remains at $455 per week ($23,660 annually) and will remain such for the foreseeable future.
At this time, President Trump’s DOL administration may be considering a new overtime rule. In late June 2017, the Trump DOL sent a request for information on the 2016 overtime rule to the Office of Information and Regulatory Affairs. Such a request indicates that the Trump DOL may be evaluating whether a new rule is needed. Consequently, employers should watch for proposed regulations that may change the salary level in the future. For now, the current salary level of $455 per week ($23,660 annually) is the controlling threshold for overtime exemptions.