Barely more than 24 hours after we published a blog telling you there was little new to report on the Department of Labor’s proposed changes to overtime regulations, something big happened: a federal judge in Texas struck the proposed rules down. Granting summary judgment to more than 55 business groups that challenged the rule, Judge Amos Mazzant ruled that the drastic increase in the salary required to be exempt — from $23,660 to $47,476 – was impermissible because it made the FLSA’s “duties” test irrelevant. Nevada v. United States Department of Labor, Civil Action No. 4:16-CV-731 (E.D. Tex. 8/31/17).
As you may recall, the Obama-era DOL regulations would have made more than four million currently exempt employees eligible for overtime pay. Especially in rural areas, the increase in the salary threshold would have made persons who were otherwise performing clearly exempt duties (such as retail store managers) entitled to overtime when they worked more than 40 hours in week. Judge Mazzant ruled that Congress intended for persons who perform the duties of an exempt employee to be exempt from the obligation to pay overtime, so long as they were paid a salary sufficiently high to screen out obviously non-exempt employees.
So what happens now? First, it is highly unlikely that the Trump DOL will appeal the ruling. Second, as we reported last week, the DOL is seeking comments on whether the overtime rules should be revised, and what an appropriate salary threshold should be. While Judge Mazzant struck down the $47,476 minimum, he noted that a salary threshold adjusted for inflation may very well be permissible. Along these lines, Labor Secretary Acosta has publicly stated that he recognizes that the salary threshold needs to be increased, but not as dramatically as was proposed. I would not be at all surprised to see new rules come out in early 2019 proposing a several year phase-in of an increase in the salary threshold, with carve outs for smaller businesses, non-profits, and employers in rural areas.