Tag Archives: DOL Final Overtime Rule

IMPORTANT DOL UPDATE: The Final Rule on Doubling White Collar Salaries Is Shot Down By Texas Judge

Contributed by Heather Bailey, September 6, 2017

31096470 - concept of time with businessman that hold an alarm clock

Concept of time with businessman holding a clock

Previously, we reported to you on the U.S. Department of Labor’s (“DOL”) Final Rule that raised the minimum salary threshold required to qualify for the Fair Labor Standards Act’s (“FLSA”) “white-collar” exemptions (executive, professional and administrative classification) from $455 per week ($23,660 annually) to $913 per week ($47,476 annually) as of December 1, 2016 (see our prior articles: U.S. DOL Publishes Final Overtime Rule and; Are you ready for December 1st? The FLSA Salary Changes Are Almost Here).

The Obama administration’s goal with this Final Rule, announced on 5/23/2016, was to give approximately 4 million workers the ability to earn overtime pay, instead of getting paid a fixed salary since many employers would not be able to afford to pay their otherwise exempt employees $47,476 annually. Implementation of this new rule had been temporarily stalled in a federal court in Texas just prior to it going into effect this past December 1st (see our prior articles: Court Enjoins DOL Overtime Rule and; Business Realities Under the Halted DOL Final Overtime Rule).

However, on August 31, 2017, Judge Amos L. Mazzant of the United States District Court, Eastern District of Texas answered many business owners’ prayers by ruling the DOL indeed exceeded its authority by more than doubling the minimum salary threshold for exempting white-collar employees (see the full case here).

The judge did not say the DOL could not raise the minimum salary at all. Rather, relying heavily on Chevron, USA, Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984), the judge stated that by more than doubling the current minimum threshold, the DOL effectively eliminated the need for looking to the employees’ actual duties and responsibilities—which was the essence of Congress’s intent when it created the FLSA white collar exemptions. The judge looked to the plain meaning of what it means to work in an executive, administrative and professional capacity concluding the primary focus was not the salary minimum but instead the actual duties and responsibilities.

What are the ramifications? The Department of Justice voluntarily dismissed its appeal of Judge Mazzant’s earlier preliminary injunction ruling putting the Final Rule on hold, so it seems unlikely it will appeal this ruling. However, this decision could catapult the Trump administration to issue a new rule providing for a more moderate increase in the minimum salary threshold – one that does not vitiate the primary focus of the “white collar” overtime exemptions: the employees’ actual duties and responsibilities.

Practice Tips:

  • The good news for now is that employers can continue to follow the previous DOL regulations for white collar exemptions (i.e., duties test and salary test).
  • If you did not do so previously, analyze your exempt positions to confirm they meet the duties test and are truly exempt positions. For example, is your manager truly a manager or is she really a lead worker? Is this manager hiring, firing and disciplining two or more employees?  Is your payroll clerk clearly just doing data entry or is he exercising independent discretion and judgment?  If the position does not meet the duties test, you transitioning the position to make it overtime eligible.
  • Ensure management is trained to enforce policies related to overtime pay such as those relating to working time, time clock procedures, meal and rest breaks, working off the clock issues, etc.
  • Did you already make changes to your employees’ pay or duties based upon the final rule going into effect on December 1, 2016?  While there are ways to change those decisions (i.e., you can change an employee’s pay moving forward for work not yet performed), you need to keep in mind morale issues for employees whose compensation may decrease either by way of a salary reduction or loss of overtime pay.  In these situations, it is highly recommended that you work with your counsel on determining the best practices for your business and your workforce.

With the judge’s ruling, many business owners will be able to find some comfort in being able to keep their exempt employees on a reasonable salary without having to break the bank.

President Trump Orders Immediate Freeze on Pending Regulations

Contributed by Carlos Arévalo, January 26, 2017

18108277_sOn January 20, 2017 shortly after taking office, newly sworn in President Donald Trump directed White House Chief of Staff Reince Priebus to issue a memorandum to the heads of executive departments and agencies directing them not to send any regulations to the Federal Registry until further notice, to withdraw any proposed regulations that have not been published and to postpone for 60 days the effective dates of regulations that have been published by the Officer of the Federal Register. As stated in Priebus’ memorandum, the purpose is to ensure the President’s appointees or designees “have the opportunity to review any new or pending regulations” and to consider “questions of fact, law, and policy that [such regulations] raise.”

With the change in administrations, this is not a surprising action. In fact, former President Barack Obama took a similar action in January 2009, at the beginning of his first term, by effectively freezing regulations that were pending from the former President George W. Bush’s administration.

What Does This Mean for Employers?

This means that any proposed or pending regulations are now facing uncertainty as to whether they will go forward, be overhauled or discarded. The most prominent pending regulations that this could impact is the Department of Labor (DOL) Final Overtime Rule. While the Final Overtime Rule was set to go into effect December 1, 2016, it was blocked from taking effect by United States District Court Judge Amos Mazzant in his November 22, 2016 ruling. Since the Final Overtime Rule did not go into effect the freeze on regulations could impact the Final Overtime Rule. However, it is likely that in order to repeal or reverse the Final Overtime Rule or any other regulations that have been finalized, President Trump would need an act of Congress or have the federal department or agency propose and enact a new regulation to replace the current one. Alternatively, since the DOL has appealed Judge Mazzant’s decision and pursued an expedited briefing schedule on December 1, 2016, President Trump could direct the DOL to abandon or withdraw the appeal. Thus, until the Fifth Circuit Appellate Court issues a decision on the appeal, or until such time as the President or DOL take action on the Final Overtime Rule, our recommendation, just as we suggested last November 2016 in response to the District Court granting an injunction on the DOL Final Overtime Rule, is that no action be taken until the issue is resolved.

With respect to other regulations, just like we stated with respect to President Trump’s executive order regarding the Affordable Care Act, it is too early to tell how or when employers will be impacted and what the new administration will ultimately do with respect to different regulations enacted during President Obama’s administration and regulations that impact businesses.

For our part, we will continue to monitor developments and provide additional information as it becomes available.

Business Realities Under the Halted DOL Final Overtime Rule

Contributed by Carlos Arévalo and Noah A. Frank, November 28, 2016

As we previously reported, last week on 11/22/2016, US District Judge Amos Mazzant blocked the 12/1/2016 implementation of the DOL Final Overtime Rule when he issued a preliminary injunction in favor of the plaintiffs (21 States and over 50 business organizations) in litigation pending in the Eastern District of Texas.

THE FINAL RULE

The Final Rule, announced on 5/23/2016, would increase the minimum salary level for exempt employees from $455 per week ($23,660 annually) to $913 per week ($47,476 annually) (see our prior article for more information).  Notably, there was no change to the Duties Test to determine whether a white collar executive/administrative/professional position actually qualified for the exemption. For months, employers across the country worked toward ensuring compliance with the Final Rule by analyzing job duties, raising salaries, converting exempt employees to non-exempt, reducing benefits, or least preferably, preparing to let employees go.

WHAT’S NEXT?

Judge Mazzant ruled that the DOL exceeded “its delegated authority and ignore[d] Congress’ intent by raising the minimum salary level such that it supplants the duties test.”  In further support of his decision, he also noted that the Supreme Court routinely strikes down “agency interpretations that clearly exceed a permissible interpretation based on the plain language of the statute, particularly if they have a great economic or political significance.”

While the preliminary injunction puts the Final Rule on hold, the case moves forward until the court determines whether the DOL had authority to make the Final Rule and whether it is valid.  In the meantime, the DOL could issue an amended rule. Alternatively, Congress may choose to act on House Bill 5813 or Senate Bill 3464, which would phase in salary increases starting at $692 per week ($35,984 annually) and reach the DOL’s salary levels in 2019 or 2020 respectively. Then, there is also the possibility that the next president will take action upon taking office.

WHERE DO WE GO FROM HERE?

Of course, a number of employers have already implemented, or notified employees of, changes as a result of the Final Rule. To the extent that such changes (or announcements) included raising salaries, employers must weigh the adverse impact on employee morale of a salary reduction versus financial burdens of staying the course. Consider strategies when hiring new employees, but do so with caution to avoid drawing equal pay or other discrimination charges. For changes not yet implemented or announced, it would be appropriate to hold off until the issue is resolved.

Because the Duties Test remains unchanged, employers that have not yet analyzed their workforce to ensure current compliance must take a critical look at their operations – just because employees are currently paid $455/week or more does not mean they are properly exempt.

Experienced employment counsel can assist with auditing current compliance, and assisting with strategies for implementing changes. In any event, stay tuned as we anticipate that overtime reform is likely to occur in light of this injunction and the 2016 election results, and wage and hour litigation is sure to follow.