Will The New Department Of Labor Overtime Rules Really Happen On December 1?

On May 23, 2016, the U.S. Department of Labor and Industry (the Department) published its final rule revising certain overtime laws. Specifically, the Department revised the rules setting the minimum salary and compensation levels for executive, administrative, and professional employees to remain exempt from the minimum wage and overtime requirements mandated by the Fair Labor Standards Act (FLSA). The FLSA exempts certain executive, administrative, and professional employees from its minimum wage and overtime requirements provided that three tests are satisfied: (1) salary basis test – the employee is paid a predetermined and fixed salary not subject to reduction because of variations in the quality or quantity of work; (2) salary level test – the employee’s salary meets a minimum amount; and (3) duties test – the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by federal regulations.

Under the new Rules, beginning December 1, 2016, an exempt executive, administrative or professional employee must earn at least $913 per week or $47,476 annually (for a full-year worker), exclusive of board and lodging, to remain exempt. Prior to the effective date, an employer is not obligated to pay minimum wage or overtime to an executive, administrative, or professional employee who earns between $455 per week (the current minimum level) and $912 per week (assuming the employee satisfies the duties test). However, beginning December 1, 2016, if an executive, administrative, or professional employee, regardless of his or her duties, earns less than $913 per week or $47,476 (for a full-year worker), the employer is obligated to pay minimum wages and overtime to that employee.

But recently, two groups filed lawsuits (both in the Eastern District of Texas) which could delay or stop the rules from taking effect. Plaintiffs alleged that the new overtime rule’s minimum salary threshold violates the Administrative Procedure Act in three different ways: DOL’s dramatic increase in the minimum salary threshold for exempt employees disqualifies millions of bona fide executive, administrative, and professional employees from the exempt status that Congress established, in violation of the FLSA and the APA. The Rule raises the minimum salary threshold so high that the new salary threshold is no longer a plausible proxy for the categories exempted from the overtime requirement by Congress, or alternatively, the minimum salary threshold, taken to this extreme, must be found not to be authorized by Congress; (2) DOL’s unprecedented escalator provision in the new Overtime Rule exceeds any authority granted to the Department by Congress, which has never authorized indexing of the minimum salary thresholds related to overtime under the FLSA; and (3) the Rule is arbitrary and capricious, an abuse of discretion, or otherwise not in accordance with law.