Federal Court Strikes Down Overtime Rule

September 20, 2017 LeadingAge DC Executive Director

A federal judge in Texas has struck down an Obama-era federal overtime rule that would have nearly doubled the salary threshold for the Executive, Administrative, Professional, Outside Sales and Computer Employees (EAP) exemption under the Fair Labor Standards Act (FLSA). The impact of the rule would have made more than four million currently exempt employees eligible for overtime pay. The move comes after the U.S. Department of Labor (DOL) under the Trump Administration signaled in a court filing this summer that it would no longer defend the rule.
The coalition of states and business groups that challenged the final overtime rule argued, among other things, that the DOL exceeded its authority by raising the salary threshold too high. In addition to the minimum salary level, employees must also perform certain duties to qualify for the FLSA’s white collar (executive, administrative and professional) exemption.
The plaintiffs argued that the 2016 overtime rule raised the minimum salary threshold so high that it made the duties test irrelevant. The federal district court agreed. As such, the judge concluded that the rule inappropriately negated the structure devised by Congress in enacting the FLSA.
The rule was scheduled to take effect on Dec. 1, 2016; however, the same Federal judge in Texas issued a nationwide injunction on Nov. 22, 2016 that initially blocked the rule. The Obama administration appealed the injunction to the U.S. Court of Appeals for the Fifth Circuit.
Employers don’t have to make any changes based on this ruling, given that the rule had already been temporarily blocked from taking effect. The existing overtime regulations, which were last updated in 2004, still apply — including the $23,660 exempt salary threshold. It is unlikely that the Trump Administration will appeal the decision. However, earlier this summer, the DOL published a request for information (RFI) on the 2016 overtime rule that could signal the agency is trying to determine whether to revise the overtime regulations.
The RFI is an opportunity for the public to provide information that will aid the DOL in formulating a proposal. The comment period ends on Sept. 25, 2017.