Last year was a busy year for employers. Many conducted internal audits and went through intense planning to comply with new U.S. Department of Labor overtime regulations that were to take effect December 1, 2016. Those 2016 regulations nearly doubled the salary threshold for the white collar exemptions from $23,660 a year to $47,476 a year ($415 a week to $913 a week). But in November 2016, a federal judge in Texas halted the regulations from going into effect, granting an injunction in a case brought on behalf of several states and business groups. The judge reasoned that the agency did not have the statutory authority to implement the increased salary level. The DOL – then still operating under the Obama administration – appealed to the Fifth Circuit Court of Appeals. And then Trump (unexpectedly) won the presidency. Now, employers for the first time have a better picture of what the new DOL may do with the 2016 regulations.
Arguments on appeal and request for information
For months, the DOL asked the court for additional time to respond to the appeal due to the change in the administration. The agency finally responded in June, arguing that the trial court erred in ruling the DOL did not have the authority to increase the salary levels. Perhaps telegraphing its future plans, the DOL told the appeals court that it “has decided not to advocate for the specific salary level ($913 per week) set in the final rule at this time” and that the DOL “intends to undertake further rulemaking to determine what the salary level should be.” In short, the DOL’s apparent intention is to increase the weekly salary level threshold, but at an amount less than $913 per week.
This argument is also consistent with official agency action. In early June, the DOL submitted a request for information (RFI) to the Office of Management and Budget, which is often the first step in issuing a new rule or changing an existing one. This RFI, once finalized, will offer the public an opportunity to provide input on how the salary threshold should be changed, if at all. And based on the comments the DOL receives, the next likely step is to issue a new proposed rule and go through a second public comment period.
What should employers plan for?
The best evidence of what the DOL may do comes directly from new Secretary of Labor Alexander Acosta. During his confirmation hearing in March, Acosta suggested that he may favor a salary threshold increase “somewhere around $33,000.” That number was to account for inflation since 2004 – the last time the salary threshold was updated. Should the DOL revise its 2016 regulations, the process may take months until a final regulation becomes effective. The biggest question mark now is what the court of appeals will do. If it affirms that trial court’s ruling that the DOL did not have authority to increase the salary threshold, it could possibly discourage the DOL from regulating even a lesser salary threshold, or set up a showdown at the U.S. Supreme Court. So, for now, employers should stay updated on the DOL’s actions and the court’s ruling, but anticipating some increase in the future may be wise. And, as always, employers should ensure compliance with the current regulations.