In May of 2016, the U.S. Department of Labor (DOL) issued a final rule changing the Fair Labor Standards Act's (FLSA) "white collar" exemptions, which was to take effect December 1, 2016. The final rule called for an increase to the minimum salary threshold requirement form $455/week to $913/week, and also for an automatic increase to that threshold. A coalition for employers filed suit in an effort to strike down the final rule, resulting in a Court Order temporarily blocking the rule from taking effect. On August 31, 2017, the Court issued a final decision striking down the rule as unlawful.
Evolution of Changes to the FLSA's White Collar Exemption Regulations
• Although the Obama administration had previously appealed the District Court's initial ruling to the United States Court of Appeals of the Fifth Circuit, the Trump administration indicated that it will no longer defend the specific salary amount called for by the blocked FLSA overtime rule. Instead, the Trump administration indicated that it would simply defend the Department of Labor's (DOL) authority to require a minimum salary amount.
• The District's Court's final decision indicated that the DOL has the authority to require a minimum salary amount and clarified that the Court's concern was with the specific amount that was required. Ultimately, the Court struck down the final rule, indicating that the change to the minimum threshold was so high as to render the duties test moot, and therefore, was unlawful. The duties test requires that employees perform certain types of tasks in order to be considered exempt under the FLSA.
• Secretary of Labor, Andrew Acosta, recently issued a Request for Information (RFI) regarding the final overtime rule, seeking comment from employers on everything from the salary threshold, to the duties test. The RFI is the first step toward proposing a new overtime rule which we expect to happen at some point in the future.
• Secretary Acosta has been vocal in his belief that the threshold warrants an increase, but not as drastic as that contained in the final rule. As such, employers can safely assume will be lower than the previous salary amount under the blocked rule.
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Finally, when the District Court previously blocked the FLSA overtime rule, the AFL-CIO sought to intervene in defending the rule but the Texas District Court denied this request. It is possible that the AFL-CIO will appeal this ruling and once again attempt to defend the blocked overtime rule.
What Should Employers Do Now?
While the Court's ruling provides a sigh of relief for many employers, employers must remain vigilant monitoring federal activity around the FLSA's white collar exemptions, as well as the wage and hour laws providing for exemption at the state or local level. Perhaps most importantly, employers should continue to regularly evaluate the classification of their employees' status as exempt or non-exempt, under the FLSA's "white collar" exemption regulations, and any state/local equivalent.
Comprehensive Services clients have access to a tool help them perform these evaluations: Navigator OT. You can access our Welcome Kit explaining the tool and how to get credentialed by clicking the hyperlink provided. Please reach out your Relationship Manager, if you need additional assistance.
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