July 06, 2017

DOL Steps Back From Obama Overtime Rule but Defends Salary-Test Authority

The U.S. Department of Labor (DOL) will not defend the Obama-era salary test for certain exemptions from overtime-pay requirements under the Fair Labor Standards Act (FLSA), according to its June 30, 2017 briefing to the Fifth Circuit Court of Appeals. Instead, the DOL is asking that the appeals court affirm the DOL’s authority to use some minimum salary, without seeking to reinstate the specific salary set by the 2016 rule ($913/week). The DOL said it intends to conduct new rulemaking to determine what the salary level should be.

The news came in the DOL’s reply brief in support of its appeal to overturn a November 2016 district-court injunction that put the 2016 overtime regulations on hold. These regulations were scheduled to take effect on December 1, 2016, and would have raised the minimum salary for executive, administrative and professional (EAP) exemptions from $23,660 annually to $47,476 annually. In response to a lawsuit filed by 21 states before the effective date, a federal judge in Texas enjoined these regulations and ruled that the DOL exceeded its delegated authority and ignored Congress’ intent because the broad purpose of the statute was to exempt from overtime those engaged in EAP duties (without regard to any minimum salary threshold). 

Under the Obama administration, the DOL appealed the order to the Fifth Circuit Court of Appeals, but it remained unclear how the Trump administration would handle overtime regulations in general and this appeal in particular. The June 30 briefing now clarifies that the DOL will not defend the Obama administration rule, but that it will seek to implement a new rule that takes into account salary levels.

Nonetheless, questions remain. For example, if the appeals court agrees with the DOL and reverses the injunction, it is not clear which salary level would go into effect. Or the Fifth Circuit could craft an order that preserves the injunction but nonetheless affirms the DOL’s rulemaking powers. And of course, the Fifth Circuit could side with the district court and hold that the DOL does not have authority to set a minimum salary at all.

For now, the status quo remains: the EAP overtime regulations are on hold. But employers should be mindful of the different scenarios that may result from the Fifth Circuit’s forthcoming decision and that the DOL under Trump is willing to revisit setting salary thresholds — though they will likely be less aggressive than under the Obama administration.

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