DOL Final Rule Under Fire
Recent Challenges to the Changes to the Overtime and White Collar Exemptions
Earlier this year, the DOL announced the issuance of the final rule making significant changes to the overtime rules for exempt employees. Most importantly, the final rule:
- Raises the standard salary level to $913 per week; $47,476 annually for a full-year worker;
- Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to $134,004; and
- Establishes a mechanism for automatically updating the salary and compensation levels every three years.
As we approach the effective date of December 1, 2016, efforts in both the legislature and the courts have been taken to try to prevent the final rule from taking effect.
First, on July 14, Rep. Kurt Schrader (D-Ore.) introduced a bill to soften the impact of the Department of Labor’s new overtime regulation. In addition to phasing in the salary threshold from December 1, 2016 to December 1, 2019, the Overtime Reform and Enhancement Act (OREA), H.R. 5813, would also remove from the regulation a provision that will increase the salary automatically every three years without going through rulemaking. The phase-in would increase the salary more gradually over three years, starting on December 1, 2016 with an increase to $35,984 ($692 per week) and ending on December 1, 2019 at the current proposed level of $47,476.
While this legislation would provide relief to businesses, it’s not clear that the bill will pass. Given the support that the administration has lent to the final rule, it seems unlikely that President Obama would sign such legislation. In addition, it is unclear whether any legislation could be passed and implemented prior to the final rule taking effect on December 1.
In addition to the legislative efforts, two lawsuits, Nevada et al. v. U.S. Department of Labor et al., case number 1:16-cv-00407, and Plano Chamber of Commerce et al. v. Perez, case number 4:16-cv-00732, were filed this week in the U.S. District Court for the Eastern District of Texas. These lawsuits essentially challenge the authority of the DOL to issue these new regulations, arguing that the salary increase is so drastic that it exceeds the agency’s authority and that the automatic increases, without additional rulemaking, as not permissible. The obvious flaw with this challenge, however, is that the DOL has always defined who meets the white collar exemption through its rule-making process and has almost always included a salary test in its regulations. Further, absent a stay being granted in the litigation, it is unlikely that these legal challenges will prevent the rule from taking effect on December 1.
Offit Kurman’s employment attorneys are closely following these challenges to the overtime rules and will provide updates in the event that there are impacts on the effective date of the final rule. In the meantime, employers should proceed with plans to comply with the new rules. Offit Kurman’s employment attorneys can help your business establish a plan to remain compliant with the new rules while still meeting your business’ needs.
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