A federal judge in Texas last Thursday struck down a U.S. Department of Labor rule that was set to extend mandatory time-and-a-half overtime pay to 4.2 million U.S. workers.
The Obama-era rule would have doubled the maximum salary – from $23,660 annually to $47,476 – most workers could earn and still be eligible for overtime pay. The rule was designed to provide more middle-class workers with overtime protections because the current salary level of $23,660 has been untouched for more than a decade and only covers 7% of salaried workers today.
U.S. District Judge Amos Mazzant in Sherman, Texas, said the Department of Labor can use a salary test but must base eligibility for overtime pay on a combination of workers’ duties and wages. Mazzant wrote that the “significant increase would essentially make an employee’s duties, functions or tasks irrelevant if the employee’s salary falls below the new minimum salary level,” and that the Department cannot “categorically exclude” workers from the overtime exemption “based on salary level alone.” In other words, the salary level was set so high that it would have improperly provided millions of workers performing managerial, administrative, and professional work with overtime pay protections.
What Happens Next?
It is unlikely the Department of Labor will appeal the ruling because Mazzant acknowledged the Department’s authority to raise the salary threshold. Earlier this year, the Department of Labor asked the Fifth Circuit Court of Appeals to affirm its statutory authority to set a salary level in a separate case. Oral arguments had, until recently, been set for October 3, 2017. However, the Department of Labor has now asked the appeals court to dismiss its appeal following the decision by Mazzant.
Nevertheless, there is still uncertainty around an appropriate salary level. The Department of Labor is seeking information from the public regarding the appropriate salary level until September 25, 2017. It intends to use the feedback received from the public to put together a proposal to revise the overtime rule. At his confirmation hearing, Department of Labor Secretary Alexander Acosta indicated that he was open to a more appropriate salary level “somewhere around $33,000.”
What Does This Mean for Employers?
Employers should be on the lookout for a revised overtime rule from the Department of Labor. Employers also need to ensure that they are complying with state laws that increase the minimum salary levels applicable to their employees regardless of the status of the federal rule.
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Disclaimer: The information provided in this post is provided for informational purposes only and should not be relied upon or construed as legal advice and does not create an attorney-client relationship. You should review with your legal advisors how the laws identified in this post may apply to your specific situation.
Emerson is Compliance Counsel at Ceridian with many years of experience in U.S. and international legal research and writing. In his current role, Emerson tracks U.S. and international employment legislation impacting Ceridian products, works closely with development teams to integrate compliance changes into the company’s Dayforce HCM software, and conducts legal research as needed.View Collection