Federal Court Permanently Strikes Down Obama-Era Overtime Rule

September 1, 2017

By:  Timothy C. Haughee & Rachel D. Gebaide

The Obama-era overtime rule that was temporarily enjoined at the eleventh hour last fall has been permanently struck down as invalid.  In late November 2016, a federal court in Texas issued a nationwide preliminary injunction against the U.S. Department of Labor (DOL) that temporarily blocked the DOL’s implementation of its then-new overtime rule, which was scheduled to take effect only a few days later on December 1, 2016.  The new overtime rule would have, among other things, significantly increased the minimum salary threshold for classifying an employee as an “exempt” salaried employee under the applicable “white-collar” exemptions to the Fair Labor Standards Act (FLSA) from $455 per week ($23,660 annually) to $913 per week ($47,476 annually).

Yesterday, the same federal court entered a permanent injunction against the DOL, declaring that the overtime rule is invalid.  As a result, employers can continue to operate under the current minimum salary basis of $455 per week ($23,660 annually) for purposes of classifying a “white-collar” employee as an exempt salaried employee.  Given that the DOL has new leadership under the Trump Administration, it seems unlikely that the DOL will appeal the court’s order, although the DOL may be concerned about limits on its rulemaking authority.

Employers should take note, however, that the white-collar exemption regulations may still change under the Trump Administration.  Last month, the DOL published a request for information (“RFI”), which can be retrieved at https://s3.amazonaws.com/public-inspection.federalregister.gov/2017-15666.pdf, pursuant to which the DOL indicated that it is gathering information and requesting public comment so that it can formulate a proposed new rule that revises the existing white-collar regulations, including those dealing with the salary threshold.  Specifically, the RFI requests that the public submit comments to eleven (11) questions relating to the white-collar regulations, including:

  • Should the regulations contain multiple standard salary levels? If so, how should these levels be set: by size of employer, census region, census division, state, metropolitan statistical area or some other method?
  • Should there be multiple total annual compensation levels for the highly compensated employee exemption?
  • Would updating the 2004 salary level for inflation be appropriate and, if so, what measure of inflation should be used?
  • Should the standard salary level and the highly compensated employee total annual compensation level be automatically updated on a periodic basis?

The public is invited to submit electronic comments to those questions via the Federal eRulemaking Portal (http://www.regulations.gov) on or before September 24, 2017.  As such, employers are encouraged to review the RFI with their managers and HR professionals in order to determine whether they should submit comments in response to the RFI, which will ultimately be considered by the DOL when it formulates its forthcoming proposed rule.

If you have any questions regarding the court’s decision to strike down the Obama-era overtime rule (including how the decision may impact your business) or with respect to providing comments in response to the RFI, please contact Rachel Gebaide, Tim Haughee, or any other member of the firm’s Labor & Employment Law Practice GroupFor more information on labor and employment law issues facing employers, please visit our blog at:  www.theemployerlawyers.com.

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