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By: Michael M. Hill
If you heard a collective sigh of relief coming from your local business community yesterday, that may be because a federal court in Texas struck down the Department of Labor’s controversial overtime rule, which had been in a state of limbo since the same court temporarily enjoined the new rule in November 2016, days before it was to go into effect. (See our past blogs on this rule here, here, here, and here.)
As many by now are aware, the rule in question sought to redefine the meaning of “bona fide executive, administrative, or professional” employee, whom Congress has deemed exempt from federal law requiring that overtime be paid for working more than 40 hours in a week. Congress gave the DOL authority to define what qualifies one as an executive, administrative, or professional employee; and the DOL traditionally has responded with a “duties test,” setting out the types of job duties one must perform to qualify, and a “salary-level test,” which served as a floor to screen out lower-level jobs that Congress obviously did not intend to exempt. The challenged rule was going to raise this salary level from $455 a week to $913, with further upwards adjustments every three years.
Now the DOL’s 2016 overtime rule has been held to be invalid, as a step beyond the authority granted by Congress. In the court’s view, by more than doubling the salary threshold for the exemption, the DOL effectively did away with the duties test and entitled many undoubtedly executive, administrative, and professional employees to overtime compensation—the very employees Congress wanted exempt.
One thing that seems to have gotten the court’s attention was the DOL’s rather brazen approach about defying Congress’s direction. The court quoted this passage from the DOL’s final rule: “White collar employees subject to the salary level test earning less than $913 per week will not qualify for the exemption, and therefore will be eligible for overtime, irrespective of their job duties and responsibilities.” Hard for the DOL to argue it was not tossing the duties test after making this statement.
What happens now? For now, the old 2004 overtime rule remains in effect. Employees who are paid at least $455 a week on a salary basis and pass the “duties test” for executive, administrative, or professional employees are exempt from the federal requirement that they be paid overtime for working more than 40 hours in a week. The current Secretary of Labor has indicated his willingness to raise this salary threshold, just not to the level the 2016 rule attempted. The DOL is accepting public comment on this topic through September 25, 2017.
For more information, please contact Michael Hill at [email protected].