Obama-Era Overtime Rule Is Invalid
On Tuesday, September 5, 2017, the Trump Administration dropped the appeal to the U.S. Court of Appeals for the Fifth Circuit which involved the nationwide injunction of the Obama-era overtime rule. As a result, employers are not required to comply with the Obama-era overtime rule, but should make sure they are in compliance with the current standards under the FLSA and ensure that all employees are properly classified. The Administration’s motion to dismiss comes one week after the U.S. District Court for the Eastern district of Texas held the overtime rule was invalid.
The Obama Administration increased the minimum salary level for exempt employees under the Fair Labor Standards Act (FLSA) from $455 per week ($23,660 annually) to $913 per week ($47,476 annually), effective December 1, 2016. However, on November 22, 2016, the U.S. District Court for the Eastern District of Texas issued a temporary nationwide injunction that prevented the overtime rule from going into effect. The Obama Administration appealed the injunction to the Fifth Circuit in December 2016, and the Trump Administration took over the appeal in January.
On August 31, 2017, while the Fifth Circuit appeal was still pending, the U.S. District Court for the Eastern District of Texas granted summary judgment in favor of the business groups and States challenging the overtime rule, holding the overtime rule was invalid. The court determined that Congress intended the Administrative, Executive and Professional FLSA exemption to apply to individuals who performed “bona fide executive, administrative, or professional capacity” duties. While setting a minimum salary to screen out obviously non-exempt employees is consistent with Congress’s intent, the significant salary increase in the overtime rule essentially makes employees’ duties irrelevant in determining if they meet the overtime exemption. The text of the final overtime rule confirms this by stating that white collar workers who do not meet the salary test “will be eligible for overtime, irrespective of their job duties and responsibilities.” The court reasoned that the FLSA requires consideration of an employee’s job duties when determining if the employee is exempt from overtime. As the overtime rule would exclude so many employees who perform exempt duties, and the overtime rule appears to make salary the determinative factor in the exempt analysis, the Court determined the final rule was unlawful.
As a result of the opinion, the Department of Labor (DOL) filed a motion to dismiss its appeal to the Fifth Circuit, arguing the appeal was no longer relevant in light of the recent decision. Ultimately, by dropping the appeal, the DOL signaled there is no chance the final overtime rule, in its current form, will be revived.
Currently, the DOL is seeking public comments on changes to the overtime regulations, including changes to the salary level test. The DOL intends to use the comments collected to issue a new proposed rule in the future. While the U.S. District Court for the Eastern District of Texas stated a minimum salary level is allowed under the FLSA exemption analysis, the Court does not clarify at what point the salary test becomes the determinative factor in the exemption analysis. If a new salary level is high enough to be the determinative factor, it may be considered unlawful and inconsistent with Congress’s intent. As a result, any new DOL proposed rules with an increased salary level may face their own legal challenges.
EEO-1 Wage Data Delayed Indefinitely
On August 29, 2017, the Equal Employment Opportunity Commission (EEOC) issued a statement announcing the revised EEO-1 report is stayed indefinitely while the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) conducts a review of the effectiveness of the new requirements. The memo, sent to the EEOC from the OIRA, raises concerns “that some aspects of the revised collection of information lack practical utility, are unnecessarily burdensome, and do not adequately address privacy and confidentiality issues.”
As discussed in the last Employer Advisor, the revised EEO-1 report was going to require the addition of wage data in order to aid the EEOC in identifying potential discriminatory pay practices. With the indefinite stay in place, employers should plan to comply with the previously approved EEO-1 form, until the EEOC releases further guidance. This means employers should file, by March 31, 2018, data regarding employees’ ethnicity, race, and sex by job category.
Special thanks to Law Clerk Hadley Simonett for her contributions to this article.
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