June 27, 2017
Mallory Narang is Compliance Counsel for Ceridian, where she collaborates with agile development teams to integrate employment compliance requirements into Dayforce. She is passionate about compliance education and co-founded graduate certificate programs in Human Resources Compliance at Mitchell Hamline College of Law and Risk Leadership at the University of St. Thomas Opus College of Business.
On June 7, 2017, new Department of Labor (DOL) Secretary Alexander Acosta announced at a House of Representatives Appropriations Committee hearing that the agency will submit a Request for Information (RFI) on the FLSA white collar exemption rule that has been stalled since November because of a federal injunction. The rule would have increased the minimum salary threshold for executive, administrative and professional employees to be classified as overtime-exempt from $23,660 to $47,476 annually.
Secretary Acosta stated the DOL will submit the RFI sometime between June 21 and 28, 2017. The RFI will seek public comment on the position the agency should take moving forward. The DOL’s decision to pursue an RFI indicates it may wish to settle the current litigation through the administrative rather than the judicial process. After the RFI’s comment period closes, the agency is expected to issue a Notice of Proposed Rulemaking (NPRM) detailing its new approach.
Secretary Acosta also noted that although the Final Rule’s minimum salary requirement of $47,476 proposed under the Obama Administration was a “shock to the system,” he supported raising the salary threshold from $23,660 to “somewhere around $33,000” to accommodate for inflation since the rule was last adjusted in 2004. This is the first public statement the agency has given regarding the Trump Administration’s stance on the fate of the rule.
Meanwhile, litigation surrounding the injunction continues to proceed. Regardless of the status of the RFI, the DOL is still required to submit its reply brief in the litigation appeal by June 30, 2017. As a response to the injunction’s delaying the Final Rule, four states (California, Illinois, Ohio, and Rhode Island) have proposed increasing their states’ minimum salary threshold to at or above $47,476. Because the federal rule’s threshold acts as a “floor” that states can raise if they choose, employers would need to comply with the highest threshold applicable to their employees.
Last November, employers seeking to comply with the rule decided whether to offer overtime pay to more employees or increase salaries to meet the exempt threshold. Many communicated this decision to affected employees only to discover the rule halted by a federal injunction days before its effective date. In December, they made the difficult choice to either face employee backlash for rolling back planned increases or incur significant and unnecessary labor cost increases for keeping them.
There is still no current requirement to comply with the rule, even with the appeal and RFI pending. Secretary Acosta’s recent comments at least indicate that instead of withdrawing the rule entirely, the DOL may choose to implement a revised version with a smaller increase. For now, employers should continue monitoring the outcome of the RFI, litigation, and similar state proposals to raise the minimum salary.