Last year, the Department of Labor instituted a new overtime rule under the Fair Labor Standards Act (FLSA), which required employers to pay a little more than $47,000 annually to qualify under the white-collar exemptions. This rule had previously been in limbo given that a Texas Federal District Court judge prevented its enforcement last Thanksgiving. The same judge has now recently struck down the rule permanently. Accordingly, short of a successful appeal, employers can now feel safe that the new rule will not be implemented.
The FLSA requires that employers pay non-exempt employees overtime for any hours worked beyond 40 hours in a week. An employee must satisfy three conditions to be considered exempt from overtime requirements:
- the employee must be paid a fixed salary;
- the salary must meet a minimum threshold; and
- the position must meet certain duties requirements applicable to executive, administrative, or professional positions.
Under the Obama administration, the DOL more than doubled the minimum salary requirement, taking it from $455 per week to $915 per week. Additionally, the threshold would have been scheduled to increase again in the year 2020 under an automatic 3-year increase the rule sought to implement.
Overview of the Recent Decision
The judge determined that the Department of Labor exceeded its authority in promulgating a new rule, with a salary requirement so high to essentially eliminate the requirement that exempt employees perform executive, administrative, or professional duties. The judge was clear that the Department of Labor still retains the ability to issue a salary threshold test but the Department went too far. There is no incite from the decision as to what would be a proper threshold. The effect of this decision is that the Department’s authority to implement a salary test is now limited.
Takeaway for Employers
A sigh of relief can now be taken by all employers who did not want to see the exemption salary requirements increased. Accordingly, employers do not have to raise salaries of exempt employees to meet the rule’s new threshold or change previously exempt employees to non-exempt status where salaries fell below the threshold. If an employer has already adjusted its compensation scheme to comply with the new rule, it can consider whether reversing course will impact the workforce.
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