Hunton Employment & Labor Perspectives

The U.S. Department of Labor continues to work towards dismantling the Obama administration’s overtime rule, saying that it intends to revise the controversial rule to lower the salary threshold under the Fair Labor Standards Act’s white-collar exemptions. The Obama administration’s rule sought to more than double the current salary requirement of $23,660 a year for white-collar exemptions. Though the rule was estimated to make 4 million additional workers eligible for overtime pay, it was also expected to cause employers significant financial and regulatory burdens.

A decision from the U.S. District Court for the Eastern District of Texas stopped the implementation of the Obama administration’s rule before its December 1, 2016 effective date. The Texas federal judge sided with 21 states by issuing a preliminary injunction that blocked the DOL’s overtime expansion. The judge also held that the DOL exceeded its delegated authority when it defined the overtime rule with respect to minimum salary level.

In its highly anticipated reply brief, the DOL requested that the Fifth Circuit overturn the Eastern District of Texas’ holding that the DOL lacks the power to set a salary test to determine whether a worker should be eligible for time-and-a-half pay. Though the DOL will not pursue its appeal of the Obama administration’s rule, it will continue to defend the position that it can set a salary requirement. The DOL has indicated that it intends to raise the current requirement, though not to the level set by the Obama administration.

According to the DOL, “[The Fifth Circuit] should… lift the cloud created by the district court’s broad reasoning, which would call into question any salary level test adopted by the department.” To support its position, the DOL emphasized that it has used a salary test to establish overtime eligibility for over 75 years. Moreover, the DOL claims that Congress has granted it leeway to interpret the overtime requirements, a power that the Fifth Circuit affirmed in a 1966 decision, Wirtz v. Mississippi Publishers Corp, 364 F.2d 603 (5th Cir. 1966).

Yet, the DOL’s position raises questions as to what may happen if the Eastern District of Texas’ decision is reversed. The DOL wants the court to affirm its power to impose a salary level requirement to help determine overtime eligibility but does not want the court to lift the injunction. If the decision is reversed and the injunction is lifted, the Obama administration’s rule may become effective immediately.

The DOL will not set a new salary test until the court of appeals confirms its power to do so. In other words, unless the district court’s opinion is affirmed, the future requirement for white-collar exemptions will likely remain uncertain.