September/October 2017 Issue

Also in this issue: Budget Bill Eliminates Domestic Partnership Benefits     |     Court Rejects Claim that Right-to-Work Law Is an Unconstitutional Taking     |     Wisconsin Court of Appeals Clarifies Municipal Authority to Issue Raze Orders     |     City of Madison Kicks Off 100% Renewable Energy Resolution Efforts

Department of Labor Overtime Rule Halted

Rick Verstegen , Brian P. Goodman | 10.19.17

The saga regarding attempts to change the regulations related to overtime exemptions under the Fair Labor Standards Act (FLSA) continues. In order for an employee to be exempt from the FLSA overtime provisions, an employee must meet both the salary basis and duties tests.

Proposed changes set forth in final regulations issued in 2016 made a number of amendments to the overtime exemptions, including increasing the salary threshold for key exemptions from $455 to $913 per week. The final regulations were to take effect on December 1, 2016, however, as reported in our January 2017 Municipal Law Newsletter, a federal district court in Texas issued a temporary injunction in November 2016, preventing the DOL from enforcing these regulations nationwide. See Nevada et al. v. United States Dep’t of Labor, 218 F. Supp. 3d 520 (E.D. Tex. 2016). The Department of Labor (DOL) appealed the temporary injunction to the United States Court of Appeals for the Fifth Circuit. 

While the appeal of the temporary injunction was pending, the DOL asked the federal district court to wait to issue its final decision on the validity of the final regulations until the appeal of the decision to impose a temporary injunction was decided. The district court denied that request and issued a decision on August 31, 2017, invalidating the final regulations. The court held that the amended changes to the salary basis test in the final regulations were inconsistent with Congress’ intent to give the DOL the authority to issue regulations defining the exemptions, including both the salary basis and duties tests. Specifically, the court concluded that by setting such a high dollar amount to satisfy the salary basis test (generally $913 per week), the new regulations essentially supplanted the duties test, which was contrary to Congressional authority. 

While the court did not conclude that the DOL could not set a salary level to qualify for exempt status, it did not opine as to what dollar figure would be permissible under the salary basis test. 

Following the district court’s decision, the DOL filed an unopposed motion with the Fifth Circuit seeking dismissal of the appeal of the temporary injunction. The DOL argued that the appeal was moot because the district court invalidated the regulations. On September 6, 2017 the Court of Appeals granted this motion to dismiss. 

In light of the district court’s decision invalidating the final overtime regulations and the dismissal of the appeal, the 2016 final regulations that increased the salary levels are invalid. As a result, the regulations as they existed prior to the 2016 final regulations are still in effect until further rulemaking by the DOL under the Trump administration. Employers can continue to rely on the existing regulations, including the salary basis test which requires earnings of $455 per week for exempt status. 

The DOL issued a Request for Information in June 2017, seeking public input concerning these FLSA regulations. In doing so, the DOL, now staffed by Trump administration appointees, stated that the salary level in the 2016 final regulations was likely too high. Responses to the Request for Information were due by September 25, 2017. Indications from the new DOL Secretary Alexander Acosta are that the DOL will seek to raise the dollar threshold in the salary basis test, but will likely propose a level in the mid-$30,000 range rather than the $47,476 that was included in the 2016 regulations. 

— Richard F. Verstegen & Brian P. Goodman