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Department of Labor Overtime Rule Halted

We have been reporting on developments on the Department of Labor (DOL) overtime exemption rules. As many bankers know, the final regulations that were issued in 2016 would have made a number of changes to the overtime exemptions, including increasing the salary threshold for key exemptions from $455 to $913 per week.

Although these regulations were finalized under President Obama and were to take effect on December 1, 2016, a federal district court judge in Texas issued a temporary injunction in November 2016, effectively preventing the DOL from enforcing these regulations nationwide. See Nevada et al. v. United States Dep’t of Labor, 218 F. Supp. 3d 520 (E.D. Tex. 2016). The same court now ruled on August 31, 2017, and invalidated the final regulations.

In short, the district court ruled against the DOL and, by granting summary judgment to the opposing parties, effectually required the DOL to rewrite the Rule or leave the current rule as is. The court ruled that DOL had overstepped its authority when it set the high salary level (generally $913 per week) that exempts an employee from overtime pay.  The judge held that the updated salary level test in the final regulations was inconsistent with the intent of Congress.

The district court did not say that the DOL could not set a salary level to qualify for exempt status. Instead, the decision stated that the 2016 final regulations made overtime status depend predominantly on the minimum salary level, which effectively supplanted any analysis of the employee’s job duties (a required component of determining exempt status under the statute). Thus, the DOL’s final regulations did not follow Congressional authority and were invalid.

The court’s ruling (and dismissal of the DOL’s appeal on the temporary injunction ruling) means that the 2016 final regulations that increased the salary levels are invalid and will not go into effect.  For now, banks can continue to rely on the existing regulations (including the salary level of $455 per week).

In June 2017, the DOL issued a Request for Information seeking input from the public concerning the regulations. The DOL acknowledged that the salary level in the 2016 final regulations was high. Responses to the Request for Information are due on September 25, 2017. Indications from the new DOL Secretary Alexander Acosta are that the DOL will be looking to raise the salary level for exempt status, but will likely propose a salary level in the mid-$30,000 range rather than the $47,476 that was included in the 2016 regulations.

We will keep you apprised of key changes in this process. 

DISCLAIMER: The information provided is for general informational purposes only. This post is not updated to account for changes in the law and should not be considered tax or legal advice. This article is not intended to create an attorney-client relationship. You should consult with legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.

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