Update on the FLSA Overtime Rule: What’s Happening Now? 

 February 28, 2017

overtime rule

Frozen. Much like Olaf the snowman, the Department of Labor’s (DOL) overtime rule, which would provide salary relief to an estimated 4.2 million American workers, is frozen.

On November 22, a Texas district judge suspended the implementation of the regulations. Judge Amos L. Mazzant argued that the DOL could not decide which employees were eligible for overtime pay based on salary alone.

Our country’s political climate has become increasingly tumultuous. A stormy political atmosphere has led to a general lack of certainty regarding many policies. This uncertainty extends to the future of the overtime rule in America.

 

What is the rule?

The overtime rule, under the Fair Labor Standards Act (FLSA), would increase the salary level necessary for employees to be exempt from overtime pay. The new threshold would rise from $455 per week to $913 per week (or $47,476).

This increase would bump the salary threshold up to the 40th percentile of earnings of all full-time salaried workers in the lowest-wage Census Region.

money stacks

The rule also increases the highly compensated employee (HCE) exemption from $100,000 to $134,004. And it would establish an automatic adjustment for these levels, to occur every three years.

These thresholds would make it more difficult for an employee to be exempt from time-and-a-half overtime pay. Employees would have to meet this higher salary test threshold and engage in certain duties that qualify them for the exemption.

 

So, what’s next?

The original effective date of the rule was December 1, 2016. But, as previously stated, that date has been suspended by the federal court. Now there is a swirl of questions surrounding the future of the rule, and what this means for employers.

The DOL and Department of Justice (DOJ) had filed an appeal to this ruling under the former presidential administration. Now, under Trump’s administration, it is unclear as to whether or not the department will continue with their appeal.

board room

On January 26th the 5th U.S. Circuit Court of Appeals granted the DOJ’s motion for a 30-day extension to file a reply brief to the overtime rule’s litigation. This extension gives the new administration more time to consider the issue, and decide how they will proceed.

The DOL has yet to finalize its leadership. Once the department’s leaders are in place they may decide to cease any further pursuit of an appeal, according to the Society for Human Resource Management (SHRM).

 

What does this mean for your business?

It depends on what your business has done up to this point. If you are one of the many employers that had already implemented changes in its business for the application of the overtime rule last year, you will not need to change anything.

A company that has a compliance plan in place, but has yet to enact it, can halt any further action. If the DOL does continue with its appeal and is successful, there will likely be a grace period for employers to ready themselves.

If by chance your business is in neither of these categories, it may be time to take action. Your company doesn’t need to implement any changes. But your business should examine its pay structure and job classifications.

Then formulate a general plan just in case the appeal continues and is successful. Don’t work overtime to figure this overtime rule. But if you do, make sure that you are classified correctly.