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What Happened to the Department of Labor’s Overtime Exemption Rule?

Many banks, along with other employers, scrambled during the course of 2016 to assess and make changes to their pay structures in order to comply with the Department of Labor’s proposed overtime exemption rule.  As you may recall, the proposed rule that was to go into effect December 1, 2016, significantly raised the minimum annual salary required to meet several overtime exemptions up to $47,476.

In September of 2016, two separate groups of plaintiffs (a group of states and a group of private sector organizations) sued the DOL to challenge the rule, and the states sought an emergency injunction to block the rule from going into effect.  On November 22, a federal district court judge in Texas granted the emergency injunction to stop the new rule from taking effect.  The Court ruled that the DOL has authority to define which employees meet the duties tests under the Fair Labor Standards Act’s executive, administrative and professional exemptions, but that authority does not extend to setting a minimum salary standard.  The Court determined that because the rule set a minimum salary level, the rule is unlawful and barred the DOL from implementing or enforcing the rule.

For now, the rule’s implementation and enforcement are on hold.  The matter has been appealed to the 5th Circuit Court of Appeals, and the DOL is currently scheduled to file its brief in the case by June 30.   

There are signs that the DOL under the new presidential administration (and newly confirmed Secretary Alexander Acosta) may no longer push for the implementation of the rule as it was written.  There are some indications that the administration may move to introduce a revised rule that would propose a lower minimum salary threshold than $47,476 (which would help maintain overtime exemption status for some employees) or may abandon the rule revisions altogether.  Bankers should stay tuned.

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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