Trump Administration Plans to Revisit Stalled Overtime Regulations

The Trump Administration created new uncertainty in a recent Court filing by declaring its intentions to rewrite an Obama-era regulation designed to dramatically expand the number of workers covered by federal overtime rules. Employers have been left in limbo since last November when a federal district court issued a preliminary injunction that prevented the U.S. Department of Labor (DOL) from implementing and enforcing the Obama-era overtime regulation.

Under the current federal regulations, executives, supervisors, administrative employees and professionals are exempt from overtime compensation if they meet two requirements of the white collar exemption. First, the employee must be paid a minimum salary of $455.00 per week, or $26,660.00 per year.  Second, they must perform “exempt duties” as defined by the DOL. The overtime rule proposed by the Obama Administration, which was scheduled for implementation on December 1, 2016, would have raised the salary threshold considerably, requiring that white collar employees receive a minimum salary of $913.00 per week or $47,476.00 per year.  However, in November 2016, a Texas federal court issued a preliminary injunction delaying the DOL’s latest rule for overtime exemptions from taking effect. The injunction came as the result of a lawsuit filed by 21 states and several business organizations that claimed that the DOL exceeded its authority by more than doubling the current salary threshold for the “white collar” exemption to overtime pay under the Fair Labor Standards Act (FLSA).

The Obama Administration appealed the ruling to the 5th Circuit Court of Appeals, but since the issuance of the preliminary injunction and the election of President Trump, the overtime rule has remained in legal limbo. On June 30, 2017, the Trump Administration advised the 5th Circuit that it has “decided not to advocate for the specific salary level ($913 per week) set in the final rule at this time.”  The government did not formally withdraw its appeal, instead asking the Court to reverse that part of the District Court’s ruling that called into question the DOL’s statutory authority to establish a salary level test in the first instance under the FLSA.  The federal government advised the Court that it was “reluctant to issue a proposal predicated on its authority to establish a salary level test while this litigation remains pending” and that, rather, it would submit a “request for information” (RFI) on the overtime rule in the next several weeks, a procedure typically used by the DOL to seek public input on new rules or changes to existing rules.

However, the Government’s latest filing does not lift the cloud of uncertainty surrounding the enjoined overtime rule – because the Government did not withdraw its appeal and the Obama-era rule has not been administratively rescinded, if the 5th Circuit were to lift the District Court’s injunction, it is possible that Obama-era rule, with its substantially increased salary threshold, would take effect immediately. Although the 5th Circuit may structure any decision on the appeal to avoid this result in light of the representations of the Trump Administration that it will seek to promulgate a revised overtime rule, this is a scenario for which employers should be prepared.

At the same time, it is unclear what salary threshold figure the Trump DOL would propose for a revised overtime rule. Any revised figure would likely between the current figure, $26,660.00, and the figure proposed by the Obama Administration, $47,476.00. During his March confirmation hearing before the Senate Health, Education, Labor and Pensions Committee, current DOL Secretary Alexander Acosta stated that the $47,476.00 figure was excessive. Mr. Acosta stated: “I believe the salary threshold figure would be somewhere around $33,000” after figuring for inflation to the cost-of-living since 2004, the last time the regulation was adjusted.

In the interim, the salary threshold remains $455.00 per week. The bottom line is that although the government’s latest filing provides some clarity to the future of the lawsuit challenging the Obama-era overtime rule, employers still face uncertainty in the long term as the lawsuit makes its way through the Courts and the Trump Administration deliberates whether to issue its own revised rule with respect to the overtime salary threshold.