Overtime Rule Salary Threshold is Dead But Issue is Not

By Liani J. Reeves - Bullard Law

July 6, 2017

Last year, the Department of Labor (DOL) under the Obama administration promulgated a rule that increased the salary threshold a worker must make to qualify as exempt from overtime from $455/week to $913/week ($47,476 per year). Businesses and states successfully challenged the rule as exceeding DOL’s authority and a Texas court blocked the rule just days before the new rule was to go into effect. At issue was whether the DOL could use salaries to determine whether employees are eligible for overtime pay or not. The DOL appealed the ruling shortly before President Obama left office.

Many speculated that the Trump administration would abandon the former administration’s overtime rule entirely. After six months of silence and several extension requests to file a response, the DOL under the new administration announced that it would defend the DOL’s ability to promulgate the rule based on salary levels, but took no position on what the actual salary level should be. The case will therefore go forward with the DOL defending its right to set the salary threshold for overtime purposes. Meanwhile the DOL is seeking public information on what the salary threshold should be and it appears that a new rule may be forthcoming.

What that means for employers is that the new salary thresholds that were scheduled to take effect last year will not go into effect. It is likely that the DOL will promulgate a new rule setting a salary threshold at something less than what the former administration proposed; Labor Secretary Acosta has previously commented that he thought the correct threshold might be around $33,000. In preparation for the old rule going into effect, employers reviewed positions and pay to determine which employees may come under the new rule. That work will still be helpful and will need to be updated if the DOL adopts a similar rule with a different threshold.

The court could still find that DOL does not have authority to set a salary threshold at all. We will keep you updated as the issue of whether DOL can adopt such a rule makes its way through the courts.