DOL’s proposed salary requirement for overtime exemptions halted

By Brandy McAllister
Risk Management Legal Counsel

On Dec. 1, 2016, a Department of Labor (DOL) final rule regarding the salary basis test for overtime exemptions was scheduled to go into effect. This rule would have increased the salary threshold for white-collar exemptions to $915 per week (instead of the current $455 per week). This significant change in salary caused concern among public and private employers alike as they would be forced to either begin paying overtime to previously exempt employees, or in the alternative, they would be required to increase all exempt employees to a minimum base salary of $47,580 annually.

Prior to the date set for the rule to go into effect, 21 states filed a lawsuit in federal court enjoining the rule, asserting, among other things, that the DOL exceeded the scope of their rulemaking authority by increasing the salary threshold to such a significant degree.

On Aug. 31, 2017, the district court issued its final order in the case, holding that the salary increase by the DOL was invalid. The court reasoned that the plain meaning of the statute indicates Congress’ clear intent for employees doing “bona fide executive, administrative, or professional capacity” duties to be exempt from overtime pay. The court went on to find that under the plain meaning of the statute, the DOL exceeded its rule-making authority by creating a salary-level test that would effectively eliminate the duties test laid out in Section 213(a)(1).

What this means for employers is that the current salary requirement for employees exempt under the white-collar exemptions will remain in place at $455 per week. However, the DOL is continuing to move forward with a change to the salary threshold. As a result of the ruling against them, the department, in their new attempt at rulemaking, has decided against advocating for a specific salary level, and instead has issued a Request For Information (RFI) to help them determine what the new salary level should be. The comment period for the RFI is set to end on Sept. 25, 2017. Once the comment period has passed we will be watching for the DOL to issue their new proposed rule addressing the salary threshold, but for now, it’s business as usual.

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