Closure on the Department of Labor’s 2016 overtime rule…maybe…
September 8th, 2017 by David Minces
Whether you are an employer that was on the edge of your seat wondering if you were going to have to change your employees’ pay structure or an employee hoping that you could get a 100% pay increase or be eligible for overtime pay, many people were following the Department of Labor’s battle in Texas’ Eastern District court. The good news for some is that it may have come to an end. On September 5, 2017 the DOL filed an unopposed motion to dismiss its appeal of the preliminary injunction granted in November of 2016 by the Eastern District’s Judge Amos Mazzant.
The mainstays of the rule
Presently, employees can be classified as exempt if they are salaried, they are paid at least $455 weekly or $23,660 annually, and their duties are mainly executive, administrative, or professional. Some other industry-specific exemptions also exist, such as exemptions for certain technology or medical personnel. Currently, the vast majority of salaried employees are considered exempt. Only about 7% of salaried employees are not considered exempt.
The current overtime salary minimum has remained unchanged since 2004 despite dramatic cost of living increases of approximately 29% between then and now. Prior to the 2004 increase the salary minimum was $155 per week or $8,060 per year. The Department of Labor under then President George W. Bush increased this figure by nearly 3 times that amount in late 2004.
In 2016, then President Barack Obama determined it was time for another increase as $23,660 per year just didn’t mean what it did in 2004. He proposed an increase to $50,400 annually in June 2015 and eventually compromised with the Department of Labor for a lower annual figure of $47,476 in 2016. The Final Rule was published in mid-2016 and had an effective date of December 1, 2016. The Final Rule’s salary minimum was based on the wage of salaried workers in the 40th percentile of the lowest-wage census region (the South).
Many employers geared up to make changes to how they paid employees, changing salaried employees to hourly, non-exempt employees, or increasing the pay of their salaried employees that were under the impending $47,476 salary floor, in advance of the December 1 effective date. On November 22, 2016 Judge Mazzant signed an order granting a preliminary injunction, preventing the enforcement of the new law in advance of the December 1 rollout, leaving prepared employers to feel as though their efforts to comply were in vain.
Politics and timing
The political timing of the final rule promulgation and effective date are speculated to have critically impacted the rule’s failure to take effect. While the salary minimum has not always been a partisan issue as both Republican President George W. Bush and Democratic President Barack Obama pushed for increases, these days nearly everything has become divided along a party line. That is proving to be the case here.
The final rule was issued in the middle of 2016, but by the time enforcement neared it was evident that President Trump would be taking office in January of 2017. This change of the guard prompted various legal actions against the increase with the hope that a new DOL Secretary and shifting political climate would stop the increase. Since the preliminary injunction there has been nothing but delay on the DOL’s part for various reasons, namely the DOL Secretary position being empty for some time and then Secretary R. Alexander Acosta requiring time to become familiar with the case. It is speculated that while Secretary Acosta and President Trump may want some increase to the salary minimum, they are not willing to fight for the Final Rule’s figure which is nearly double the current minimum.
The authority of the DOL
The Eastern District court noted that the DOL does have the authority to implement a minimum-salary requirement, however they stressed that the Final Rule’s salary level was too high and excluded too many individuals who would otherwise be exempt. The court elaborated that the duties and not the salary should be the primary indicator of whether a position is exempt and that the intention of the salary minimum was to set “a floor to screen out the obviously nonexempt employees, making an analysis of duties in such cases unnecessary.” The court highlighted that the Final Rule’s provision that mandated an increase to the salary minimum every three years was also outside of the scope of the DOL’s authority.
The request for dismissal of the DOL’s appeal appears moot now that the Eastern District found that the agency has the authority to change the salary minimum, but spoken on to what degree that change can be. The DOL is now requesting comments through September 25 so that they may engage in crafting a new Final Rule, hopefully one that will actually go into effect. So far, over 138,000 comments have been received.
Analysts are predicting that the new salary minimum will show a modest change from the current one, and will not be near the $47,476 set out in the previous rule. To some, the court’s restriction on the DOL’s authority to increase by nearly 100% seems strange as previous increases of 3 times the minimum salary have been imposed by the agency without issue.
Minces PLLC will be sure to follow the DOL’s rulemaking process and let you know if and when a change is coming. In the meantime, if you are an employee or an employer with questions about overtime pay, we can help!
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