More Questions Than Answers: U.S. DOL Publishes Request For Information On FLSA Overtime Rule
On July 26, 2017, the Department of Labor (DOL) published a Request for Information (RFI) soliciting public comment on the Fair Labor Standard Act’s (FLSA) minimum wage and overtime requirements for certain executive, administrative, outside sales, and computer employees. The DOL will likely use the feedback it receives to assist with formulating a proposal to revise the overtime regulations.
Generally, the FLSA requires covered employers to pay employees at least the federal minimum wage for all hours worked and an overtime premium pay for any hours over a forty-hour work week. Section 13(a)(1) of the FLSA exempts from these protections “any employee employed in a bona fide executive, administrative, or professional capacity” and permits the Secretary of Labor to define these terms through regulations. See 29 U.S.C. § 213(a)(1). This exemption is commonly referred to as the white collar exemption.
Three criteria have been used to define the white collar exemption. With some exceptions, an employee is exempt if: (1) the employee is paid on a salary basis (salary basis test); (2) the employee receives at least a minimum salary amount (salary level test); and (3) the employee’s job must primarily involve executive, administrative, or professional duties as defined by the regulations (duties test). See 29 CFR part 541.
In May of 2016, the DOL published a new overtime rule with an effective date of December 1, 2016. The new rule was controversial because it doubled the minimum salary level required for employees to qualify for the white collar exemption from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). The new overtime rule also created an updating mechanism to increase the minimum salary automatically every three years.
21 states filed a suit against the DOL seeking to enjoin the rule from taking effect. In November 2016, U.S. District Judge Amos Mazzant of the Eastern District of Texas issued a nationwide, preliminary injunction that blocked the new rule. The preliminary injunction resulted in confusion for many employers because it was issued only days before the new rule was to take effect and after many employers had increased employees’ compensation or changed employees’ overtime classification.
Judge Mazzant’s decision is currently on appeal to the U.S. Court of Appeals for the Fifth Circuit. Since filing the appeal, the leadership and philosophy of the DOL changed due to the election of Donald Trump. In its reply brief filed on June 30, 2017, the DOL opted not to advocate for the higher salary level set by the Obama Administration overtime rule. The DOL did, however, take the position that the DOL can use salary as a factor for determining whether an employee is paid overtime.
Secretary of Labor Alexander Acosta testified in June at a budget hearing of the Appropriations Committee of the House of Representatives that the DOL planned to address aspects of the blocked overtime rule. Around this time, the DOL also announced that it would withdraw two guidance memoranda issued during the Obama Administration. Although the withdrawal of these memos does not change the law, it does signify that the DOL is distancing itself from positions taken during the previous Administration.
Likewise, issuing the RFI on the overtime regulations hints at a change in how the Trump Administration may enforce the FLSA. The RFI states that the DOL is reviewing the impact of the 2016 overtime rule “with a focus on lowering regulatory burden.” It also acknowledges concerns that the 2016 overtime rule set the salary level too high, such that it “inappropriately excludes from exemption too many workers who pass the standard duties test[.]” The RFI requests feedback on questions that relate to the salary level test, the duties test, inclusion of non-discretionary bonuses and incentive payments to satisfy a portion of the salary level, the salary test for highly compensated employees, and automatic updating of the salary level tests.
At this time, it is unclear exactly what form the overtime regulations will ultimately take. Under the Trump Administration, the DOL may opt to raise the salary threshold, though it is unlikely to increase to the level set by the 2016 overtime rule. The RFI has a 60-day comment period, which concludes on September 25, 2017.