Shortly after the presidential election in 2016, a federal district court in Texas issued an order halting the United States Department of Labor’s (USDOL or the Department) efforts to significantly raise the minimum salary for exempt employees throughout the United States, effectively blocking a new overtime rule from taking effect. The new regulation was scheduled to become effective on Thursday, December 1, 2016.
The new law, which was one of President Obama’s key priorities for his final days in office, would have doubled the minimum salary requirement which “exempts” hourly workers from state and federal overtime laws, from $23,660 to $47,476. As a general rule, in order to be exempt from overtime, an employee must meet a certain minimum salary, as well as a qualitative analysis on the type of “duties” s/he is charged with providing. (Note: California has its own minimum salary threshold which increased to $43,680.00 effective January 1, 2017. An employee is entitled to receive the greater of the federal or state minimum salary in order to qualify as exempt).
Texas District Judge Amos L. Mazzant, III ruled that the wage increase was beyond the Labor Department’s authority pursuant to the federal Fair Labor Standards Act (FLSA). The judge then issued a preliminary injunction, which effectively barred the wage increase. Over the next seven months, the USDOL filed several appeals seeking to overturn the injunction. In late June, the USDOL abandoned its final appeal of the injunction. However, shortly thereafter the Department published a new Request For Information (RFI) seeking clarification of and insight for the current rules regarding exemption status.
The RFI process is the first in a series of steps the USDOL must pursue, prior to making a change to the existing administrative regulations. According to the Department, “Agencies generally use RFIs when they want public input on whether a new rule or changes to an existing rule are needed, and comments on what course the agency should take should it decide to move forward” By abandoning the judicial appeal process, it would appear that the Department is planning to “go back to the drawing board” on the issue of the minimum salary necessary to qualify for an exemption under federal law. Moreover, given the lack of success by the USDOL in its other appeals, the RFI process may be an attempt to avoid an adverse judicial ruling that would potentially restrict the Department’s ability to make rule changes in the future.
As part of the RFI process, on July 26, 2017 the Department opened a 60-day public comment period on a number of key issues, including: the methods the USDOL should use in order to determine a salary threshold for overtime eligibility; whether the threshold should vary by geographic region; and, whether the minimum salary should automatically update on an annual basis.
The entire RFI, including instructions on how you can submit written comments, can be found here. It is important for small business owners to voice their opinion on the issue of exemptions, minimum salary and administrative procedures – since these issues can have a significant impact on a business’ day-to-day operation. Many organizations, such as the U.S. Chamber of Commerce, Society of Human Resources Management (SHRM), and local business groups have encouraged business owners to respond during the 60-day public comment period, to increase the USDOL’s awareness of how a significant increase to the minimum salary threshold would affect their business. Unfortunately, until the USDOL decides to make its intentions clear for future policy public, we are left in a cloud of uncertainty as to what changes may be coming down the road.
As always, we strongly encourage you to consult with competent employment law counsel who can help you navigate the uncertainty and assist you in applying the sometimes convoluted federal and state wage and hour laws to your business.