Stephen Scott, BridgeTower Media Newswires
In 2004, the U.S. Department of Labor (USDOL) established $455 per week as the earning level at which employees would become exempt from the Fair Labor Standards Act (FLSA) laws regarding minimum wage and overtime. Essentially, employees earning anything below that threshold are eligible for overtime pay.
In 2016 there was a proposal to increase the total per week to $913. However, concerned states and business groups sought to block the rule from taking effect, and, at the last minute, a federal court issued a preliminary injunction preventing the rule from being implemented on a nationwide basis. Subsequently, the current administration indicated that it would not advocate for $913 per week, and instead would undertake additional rulemaking to determine what the salary level should be.
In September 2019 the USDOL announced the revised Overtime Rule, which will set the minimum salary threshold for the FLSA’s white-collar exemptions at $684 per week ($35,568 per year). The rule will expand overtime pay obligations to an estimated 1.3 million additional workers. That law is set to take effect on Jan. 1, 2020. This raises the question: What should you do, and will this be struck down in the same way the 2016 Obama amendments were?
After the drama surrounding the last-minute injunction that blocked the 2016 proposal, it would be normal for employers to feel gun-shy about adjusting to these changes – fool me once, shame on you; fool me twice, shame on me. However, while there is always a chance for litigation, there are several reasons why you should still prepare as if this rule will go into effect as planned on Jan. 1, 2020.
First, while there is no magic number for setting the salary threshold, the new rule avoids some of the more problematic areas that existed with the first attempt. The $684 per week threshold will require reclassification of some employees (or pay increases), but a far less significant portion than would have been affected had the $913 per week proposal of 2016 taken effect.
Second, while the rule contains some of the same flaws as Overtime Rule 1.0, they generally are not the kinds of concerns that were previously raised in lawsuits. Employer advocates will have difficulty taking the position that this particular threshold eclipses the duties tests. Moreover, while employee advocates might feel that the threshold is set at too low a level, meeting the pay component does not make someone exempt in and of itself, so this argument is more esoteric and may not merit an injunction.
Finally, the USDOL is likely well prepared – at this point – to defend the rule. Even aside from the litigation, it has received voluminous public feedback on an increase from $455 per week numerous times, including those shared in 2015, 2017 and 2018. So, while litigation is almost always inevitable, employers should not be idle in preparing for this rule to take effect.
Contact professional counsel to obtain materials and other guidance while considering what steps to take.
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Stephen Scott is an associate in the Portland office of Fisher Phillips, a national firm dedicated to representing employers’ interests in all aspects of workplace law. Contact him at 503-205-8094 or smscott@fisherphillips.com.
