On November 22, 2016, a federal court issued a nationwide injunction blocking an administrative regulation that would have extended overtime pay to 4.2 million salaried workers.
On June 20, 2016, we blogged about a new Department of Labor rule that would have doubled the salary threshold – from $23,660 to $47,476 per year – that an employee can earn while still remaining eligible for overtime pay under the Fair Labor Standards Act of 1938 (“FLSA”). To read that blog, please click here. On November 22, 2016, a federal judge agreed with 21 states and a coalition of business groups that this rule, which would have taken effect on December 1, 2016, was unlawful and blocked it from going into effect.
Specifically, the FLSA exempts from overtime protection, “any employee employed in a bona fide executive, administrative, or professional capacity.” 29 U.S.C. § 213(a)(1). The federal district court found that “Congress intended [for this] exemption to apply [solely] to employees doing actual executive, administrative, and professional duties [. . .] which does not include a minimum salary level.” By raising the minimum salary level by such a dramatic level, to $913 per week, the federal district court found that the Department of Labor replaced this duties test with “a de facto salary-only test” – in direct conflict with congressional intent.
The ruling throws into chaos the Department of Labor’s new overtime regulations. While the decision came before the effective date of the regulations, many employers already raised employee salaries to avoid the new overtime regulations, creating difficult practical and morale issues involved in revoking promised pay raises on the eve of the holiday season. It should be noted that many employers may have raised employee salaries as a kneejerk reaction without having conducted a proper economic, cost-benefit analysis. And, while the Department of Labor could appeal the federal district court decision, it is unclear whether the new presidential administration would support the appeal or even the new overtime regulations themselves.
McGown & Markling will monitor this important issue as it continues to develop. Please check back with our website for regular blog updates.
To read the federal district court’s decision, please click here.
Authors: Matthew John Markling and Patrick Vrobel
Note: This blog entry does not constitute – nor does it contain – legal advice. Legal jurisprudence is like the always changing Midwestern weather. As a result, this single blog entry