Update on the Department of Labor’s Delayed Final Rule to Increase the Salary Threshold for the White-Collar Overtime Exemption

     The employment attorneys at Nardone Limited regularly assist our clients with labor and employment issues, such as Department of Labor (“DOL”) compliance, as well as guidance on preventing and responding to discrimination and harassment charges filed with the Equal Employment Opportunity Commission (“EEOC”) and the Ohio Civil Rights Commission (“OCRC”). Our employment attorneys also regularly update clients on news, events, and changes in law as it relates to labor and employment issues that may impact our clients.

     As we had previously advised in our June 24, 2016 blog post, the Department of Labor revised an overtime regulation that would have required employees classified under the white-collar DOL overtime exemption to be paid $913 per week ($47,476 annual) to be eligible for the white-collar DOL overtime exemption from overtime pay (the “Overtime Rule Change”). The new threshold wage requirement was previously set to become effective on December 1, 2016. In November 2016, however, in the case of State of Nevada v. United States Department of Labor, a federal district court in Texas issued a preliminary injunction ruling to block the Overtime Rule Change.

     Based on the Texas court’s ruling, the Overtime Rule Change never went into effect and the prior white-collar DOL overtime exemption amount is unchanged until further notice, with the required threshold salary amount remaining at $455 per week ($23,660 annually). The U.S. Department of Justice (“Justice”) appealed the preliminary injunction ruling just before President Trump took office, and speculation ensued about whether President Trump would direct Justice to drop the appeal. After Justice obtained multiple extensions on filing their merit brief on the appeal, Justice did go forward and file an appeal of the preliminary injunction ruling, as exceeding the judiciary’s ability to quash executive authority.

     Then, on August 31, 2017, the trial court issued a ruling granting summary judgment in the trial court, concluding that: (i) the Overtime Rule Change is contrary to the Fair Labor Standards Act and (ii) that the DOL has the authority to implement a salary threshold, just not one this high. Five days later, the DOL sought to drop its appeal in the Fifth Circuit in light of the district court’s ruling, which the circuit court dismissed on September 6, 2017. Justice was not expected to appeal the trial court’s summary judgment ruling, based on anticipated direction from the Trump Administration.

Looking Ahead: What can Employers Expect Next in Light of the Ruling to Block the Overtime Rule Change?

     Despite widespread expectation, however, Justice appealed the Texas court’s summary judgment ruling on Monday, October 30, 2017, just before the deadline for appeal. The appeal and uncertainty regarding the now defunct Overtime Rule Change raises the ultimate question: What can employers expect to come next regarding the overtime rules for white-collar employees?

     We believe—as do many other experts in the Employment Law area—that Justice has appealed the Texas court’s ruling solely to prevent precedent allowing the courts to overturn executive authority. Further, we expect that the DOL will ultimately withdraw the Overtime Rule Change and release a new proposed rule, mooting the Texas case, and requiring its dismissal.

     Regardless of the outcome of the appeal on the Texas court’s ruling, all indications are that the Overtime Rule Change will never go into effect under the Trump Administration. But, based on recent Department of Labor activity, what we are likely to see is a proposal for a much more moderate increase to the salary threshold for the white-collar overtime exemption. On July 26, 2017, the DOL issued a Request for Information (RFI), requesting comments on “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees,” noting that “the RFI is an opportunity for the public to provide information that will aid the [DOL] in formulating a proposal to revise these regulations.”

     The prevailing speculation is that employers will eventually end up with a new rule proposing a white-collar overtime exemption threshold around $35,000. In fact, based on Secretary of Labor Acosta’s specific testimony during Acosta’s confirmation hearing, the expectation is that the next salary threshold will be “around $33,000.” Thus, all signs indicate that the salary threshold for the white-collar overtime exemption will likely be considerably lower than the $47,476 amount that was set to go into effect under the invalid Overtime Rule Change. We will be following any further developments on this matter closely and post a follow-up blog as updates become available.

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     The Nardone Limited employment attorneys handle a full spectrum of employment law issues, including business disputes and litigation, drafting of employment and restrictive covenants, and consultation on employment law issues. If you need advice or representation in an employment dispute before the EEOC, the OCRC, or regarding potential labor and employment litigation, feel free to contact Nardone Limited.