By Michele L. Jakubs*
Will President-Elect Donald Trump provide employers with a reprieve from the Department of Labor’s (“DOL”) new rule regarding overtime? We will all have to wait and see.
On May 18, 2016, the DOL announced its final rule increasing the salary thresholds for exemptions under the Fair Labor Standards Act (“FLSA”). To meet an exemption from overtime under the new rule, employees must meet both the duties test and the increased salary requirement. The final rule sets the new salary threshold for “white collar” exemptions at $47,476 annually. For the highly-compensated employee exemption, the new salary threshold is set at $134,004 annually. The final rule (including the new salary thresholds) goes into effect on December 1, 2016.
The FLSA generally requires employers to pay employees for any time worked in excess of forty hours per work week at a rate of one-and-a-half times the employee’s regular rate. The FLSA exempts “white collar” employees from the overtime requirement, provided the employees meet specific criteria: (1) the employees receive a fixed salary; (2) the salary meets the minimum threshold requirement (currently $455 per week, or $23,660 per year) which increases to $913 per week, or $47,476 per year on December 1; and, (3) the employees’ responsibilities primarily involve executive, administrative, or professional duties (the “duties test”). Highly-compensated employees who regularly perform one or more exempt duties also are exempt.
In September, 21 states, including Ohio, filed a lawsuit, State of Nevada, et al. v. U.S. Dept. of Labor, et al., in federal court, challenging the final rule. The Court consolidated this case with a similar case filed by various business associations and Chambers of Commerce. The States seek a declaratory judgment from the Court holding that, among other things: (1) the final rule is unlawful under the Constitution; (2) the final rule’s automatic indexing of the salary-basis test every three years is without Constitutional authority and violates the Administrative Procedure Act; and, (3) the final rule is unconstitutional as applied to the States. The States also have asked the Court to issue an injunction enjoining the final rule from having any legal effect. The Court has not yet ruled and briefing is not yet complete.
Employers should continue to prepare for the December 1, 2016 implementation of the final rule. At this point, it remains unclear whether President-Elect Trump will take action to repeal or modify the new rule once he takes office in January 2017. It also remains possible that the Court hearing the case from the States and business Plaintiffs may issue an order staying the effective date of the final rule pending resolution of the legal challenges. Absent an action by the government or the Court, the new rule will take effect on December 1, 2016. Z&R will continue to monitor the status of the new rule and will issue further client alerts as information becomes available.
*Michele L. Jakubs, an OSBA Certified Specialist in Labor and Employment Law, has extensive experience defending employers in FLSA actions and is well versed in the nuances of the law. If you have questions about the DOL’s final rule or the FLSA more generally, please contact Michele (mlj@zrlaw.com) at 216.696.4441.
