On March 22, 2019, the U.S. Department of Labor (DOL) released its proposed rule to raise the annual salary threshold for a worker to qualify as exempt under its “white collar” regulations from $23,660.00 to $35,308.00. The public comment period closed yesterday, May 21, 2019, with almost 60,000 comments from the business and worker communities.
History of the Proposed Rule
The road to a final rule over the salary threshold has been long and bumpy for the DOL. In 2014, President Obama directed the DOL to “update and modernize” the existing Fair Labor Standards Act’s (“FLSA”) white collar exemptions. Two years later, the DOL released its final rule revising the regulations by doubling the salary threshold to $47,476.00.
The final rule dramatically increased the number of workers who would qualify for overtime pay, forcing every employer in the country to carefully assess how to handle the additional financial burden. Continue reading →
On August 31, 2017, a Texas federal judge invalidated the Obama administration’s controversial rule expanding overtime protections to millions of white collar workers, saying the U.S. Department of Labor (DOL) improperly used a salary-level test to determine which workers are exempt from overtime compensation.
As you likely will recall, the Obama administration’s “overtime rule” (which we explained in detail here) raised the minimum salary threshold required to qualify for the Fair Labor Standards Act’s “white collar” exemption to just over $47,000 per year. In granting summary judgment to the Plano Chamber of Commerce and other business groups who had filed a lawsuit challenging the “overtime rule,” U.S. District Judge Amos Mazzant said that the “significant increase” to the overtime threshold amount would essentially render meaningless the duties, functions, or tasks that an employee performs if their salary falls below the new minimum salary level. Judge Mazzant further stated that “[t]he department has exceeded its authority and gone too far with the final rule,” and that “[t]he department creates a final rule that makes overtime status depend predominately on a minimum salary level, thereby supplanting an analysis of an employee’s job duties. Because the final rule would exclude so many employees who perform exempt duties, the department fails to carry out Congress’s unambiguous intent.”
As we previously informed you here, the “overtime rule” had been on hold by way of an injunction since late November 2016 as a result of a legal challenge brought by states and business groups, and as a result, employers have been waiting for clarity since that time. Through his decision, Judge Amos Mazzant has now provided employers with much needed clarity. Based on previous statements made by the current administration’s Labor Secretary, Alex Acosta, it is expected that at some point in the future the DOL will propose a new rule, setting the salary threshold somewhere between the current level of $23,660 and the $47,476 level set by the Obama administration. However, based on Judge Mazzant’s harsh criticism, as well as the tenor of the Trump administration, it is unlikely that a new rule will be promulgated anytime soon. So, for now, employers can continue to abide by the traditional overtime threshold that has been in place for more than a decade.
The day that has been looming over employers for the past 2 years since President Obama directed the U.S. Department of Labor (“DOL”) to update and modernize the existing Fair Labor Standards Act’s (“FLSA”) white collar exemptions has finally arrived. Today, the DOL released its final rule revising the regulations governing who is exempt from overtime, along with guidance on its major provisions. The final rule, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, largely reflects what the DOL had proposed in 2015, with some important revisions, including a slightly lower salary threshold level at $47,476.00. However, that salary floor still sits at more than double the current salary threshold of $23,660.00.
There is no doubt that the final rule will dramatically increase the number of workers who will now qualify for overtime pay, forcing every employer in the country to carefully assess how to handle the additional financial burden. Indeed, the DOL projects that the rule will extend overtime eligibility to 4.2 million workers.