Federal Court Throws Out FLSA Overtime Rule: What’s Next for Employers?

A federal court in Texas has struck down the controversial overtime rule that would have more than doubled the salary threshold for exempt employees under the Fair Labor Standards Act (FLSA). The same judge who blocked the rule last year sided with the business groups and 21 states challenging the Obama-era regulation.

The rule would have increased the minimum salary for exemption from overtime pay from $455/week ($23,660 a year) to $913/week ($47,476 a year) — a move that would have extended mandatory overtime pay to more than 4 million U.S. workers.

Duties Test Remains Relevant

In his August 31 decision, U.S. District Judge Amoz Mazzant noted that the Department of Labor (DOL) proposal placed too much importance on wages — rather than job duties — in determining worker eligibility for overtime. He pointed out that Congress directed the DOL to use the duties test, and the agency exceeded its authority by issuing a salary-level test that effectively eliminates the duties test. He added that doubling the previous minimum salary would “make an employee’s duties, functions, or tasks irrelevant if the employee’s salary falls below the new minimum salary level.”

The judge’s final decision came nine months after he issued an injunction blocking the new rule — mere days before it was scheduled to take effect on December 1, 2016.

It’s important that employers ensure workers are properly classified according to the existing ‘duties’ rules.

Going Forward, New Overtime Rule Likely

The stage is now set for the Trump administration to introduce a new rule with a lower salary threshold. The DOL has already started the process by issuing a Request for Information that seeks public input.

Employers can submit comments to the DOL on the appropriate salary threshold and duties for determining overtime exemption through September 25. The wide-ranging scope of the questions in the RFI indicates the DOL is open to feedback and will consider all possibilities. The process could take several months before a final rule is ready.

Considering the ongoing attention on overtime rules, it’s important that employers ensure workers are properly classified according to the existing ‘duties’ rules.

ComplyRight will continue to monitor any developments and provide updates.