Federal Court Halts Salary Increase for Overtime-exempt Employees

Our readers may remember reading our previous blog posts about the US Department of Labor’s (DOL) Final Rule increasing the minimum salary that bona fide executive, administrative, and professional (EAP) employees must earn to be exempt from overtime. The regulation proposes to increase the pay threshold for exempt employees from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). It means that employers have to pay time-and-a-half to their EAP employees who work more than 40 hours in a given week and earn less than $47,476 a year, or give low-wage EAP employees a raise, up to the new salary threshold. The regulation was scheduled to take effect on Dec. 1, 2016.

Now, the rule has been placed on hold while the DOL’s authority to regulate the minimum salary increase is being litigated in a Texas Federal District Court. Last week, the presiding Court issued a temporary injunction preventing “on a nationwide basis” the new federal overtime regulation from going into effect on Dec. 1, 2016.

The regulation was challenged in court by 21 state governments and more than 50 national business groups. The basis of their complaint is that the DOL exceeded its statutory authority and violated Fair Labor Standards Act (FLSA) by raising the minimum salary threshold and requiring an automatic increase in the salary threshold in the every three years. The Rule was also supposed to increase the highly compensated employee exemption annual salary threshold from $100,000 annually to $134,004.

The Court has not had time to fully consider the issues so a final determination has not been made. For now, the injunction means that employers should continue to administer employee overtime exemptions under existing salary level standards. CPC will be reporting future developments in the lawsuit here. Stay tuned.