Overtime Salary Changes Will Not Take Effect

In May 2016, the US Department of Labor issued a new final rule amending the salary requirements for workers who qualified for overtime exemptions under the Fair Labor Standards Act (FLSA). Under the rule, the salary requirements for exempt workers would rise from a minimum of $455 per week ($23,660 per year) to $913 per week ($47,892 per year) with additional increases scheduled for every three years beginning in 2020.

In November 2016, before the new rule went into effect, a preliminary injunction was issued by a Federal District court in Texas, preventing the rule from taking effect. The Department of Labor, then still under the Obama administration, appealed the injunction. On August 31st, the Federal District Court issued their ruling on the appeal, finding that “the Department does not have the authority to use a salary-level test that will effectively eliminate the duties test.” The court ruled the final rule is invalid and permanently enjoined implementation.

What’s next: The Department of Labor will have to make a decision about whether to appeal the permanent injunction. However, this course of action seems very unlikely given the administration change that has taken place in the time since the appeal of the preliminary injunction.

What it means for businesses: In the unlikely event the Department of Labor decides to appeal the ruling, it would still take many months for the appeal to be heard. It seems likely that the Department of Labor will decide not to appeal and will work with the Trump administration to draft revised overtime and salary rules instead. Either way, the old rule remains the rule for the time being. If a worker qualifies for a salary exemption from overtime pay, the rate of $455 per week ($23,660 per year) still applies. However, just because a business pays a worker at that rate or higher does not mean that their job and duties qualify for exemption from overtime pay. Make sure employees are properly classified before making the decision to pay a worker a salary instead of overtime.