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Court Invalidates Overtime Final Regulation

In 2016, the Department of Labor (“DOL”) enacted a final regulation drastically changing the salary threshold for employees subject to exemption from overtime under the Fair Labor Standards Act (“FLSA”) because of their employment in executive, administrative or professional positions (the so-called “white-collar” exemptions). The final regulation would have increased the salary threshold from $455 per week ($23,660 per year) to $913 per week ($47,476 per year). Both states and private businesses sued, and in November 2016, a judge in Texas ordered that the final regulation be placed on hold, pending the outcome of the case. Accordingly, the final regulation did not go into effect in December 2016, as had been planned.

Now, the Texas court has ruled that the final regulation is invalid. The court held that the DOL did not have the authority to increase the salary threshold as high as it did, because the increase effectively nullified the “duties test” for millions of workers. The FLSA directs that whether an employee is exempt depends on his/her duties. The court held that the FLSA did not give the DOL the power to ignore the duties of millions of employees and make them nonexempt simply by raising the salary threshold. The court did not rule out the DOL’s ability to use a salary threshold test at all, but simply held that the final regulation, more than doubling the salary threshold, could not stand. It does not appear that the DOL will appeal this finding.

What Does This Mean For You? Many employers had already made changes to their salary structures to align with the final rule. Those businesses may want to weigh whether, as a result of this decision, they want to take further steps to realign salaries. Employers who did not make changes do not need to make them at this time. Keep in mind, however, that this case does not nullify the DOL’s ability to modify the salary threshold in the future. The DOL already has requested input about changes to the overtime regulation, and will probably propose a less drastic increase in the salary threshold relatively soon.

If you have any questions or concerns about this update, or any other employment or labor law questions, please contact S. Whitney Rahman at swr@blakingerthomas.com or (717) 509-7237.

**This update is provided for informational purposes only and
should not be construed as legal advice or as creating an
attorney-client relationship where one does not already exist**