The Obama Overtime Rule is Dead

Posted by Attorney David McClurg in Employer-Employee Relationship, Labor Relations / Comments

Last November, a federal judge in Texas blocked implementation of the Department of Labor (“DOL") Rule that raised the salary an employee must earn to be exempt from federal overtime regulations from $455/week ($23,660/year) to $913 per week ($47,476/year). He held that the plaintiffs were likely to prevail on the merits of their argument that the DOL exceeded its authority by imposing such a large increase in the salary test. After further consideration of the merits of the parties' arguments, the court formally struck down the Rule at the end of August on that same basis.

Although the initial injunction was appealed by Obama appointees, President Trump's Secretary of Labor withdrew the appeal and announced that it was withdrawing the Rule and seeking comments on more moderate changes that might better serve the original intent of the drafters of the Fair Labor Standards Act. Possible changes could include: updating the salary threshold to keep pace with inflation; multiple salary tests depending on employer size and geographical regions; different salary level tests for the different white collar exemptions; basing the exemption entirely on the duties test without regard to the salary paid by the employer; inclusion of non-discretionary bonuses and incentive payments as part of an employee's salary for purposes of applying the test; or automatic updates to the salary thresholds on a periodic basis.

Employers that raised salaries to comply with the Rule or that advised employees that they would be reclassified as non-exempt and entitled to overtime compensation could reverse those decisions, but will obviously need to consider the negative impact on morale that such decisions might have in the workplace.

If you have questions about this or other labor & employment questions, please feel free to contact Dave McClurg at (414) 223-6956 or dmcclurg@petriestocking.com.