On November 22, 2016, a federal judge in Texas issued a nationwide injunction blocking the Department of Labor’s (“DOL”) rule requiring overtime pay for certain so-called “white collar” employees.
Under the Fair Labor Standards Act (“FLSA”), employees are entitled to overtime pay at one and one-half times the employee’s regular rate of pay for all hours worked in excess of forty per week. There are exemptions to the requirement to pay overtime. The commonly referred to “white-collar” rule exempts employees who work in an executive, administrative or professional capacity and, currently earn more than $455 a week.
The new DOL rule, set to go into effect December 1, had raised the salary cap below which all workers must receive overtime pay from $455 a week to $921 a week (or $47,476 a year). In other words, under the new rule, if an employee earns less than $47,476 or more annually, then the employee is likely entitled to overtime pay. A group of 21 states and more than 50 business challenged this new DOL rule. The judge found that the DOL exceeded its authority by unilaterally raising the salary cap. The injunction halts enforcement of the rule unless the government appeals and wins a countermanding order from the appeals court.
Unfortunately, the issue will remain unresolved for several more weeks. For now, the rule is not in effect and employers can follow the old DOL rule (meaning the $455/week threshold for exempt status). If the ruling is appealed and the appeals court rules in the DOL’s favor, then the new salary threshold will take effect. If the appeal is not resolved by the time the new administration takes office, the appeal may be withdrawn and the old DOL rule will be revived.
What does this mean for employers? If an employer has not already made changes to an employee’s non-exempt status, then it is not obligated to make any now. However, if an employer has altered an employee’s non-exempt status, the most cautious approach is to keep the new status in place until it becomes clear what employers’ obligations are regarding overtime for its “white-collar” employees.