New DOL to Decide Fate of Employee Exemption Status

Christopher T. James

December 9, 2016

On December 1, 2016 a new federal overtime rule was set to go into effect that would have updated Department of Labor (DOL) regulations related to employee exemption status under the Fair Labor Standards Act (FLSA)—and would have a significant impact on employers. For now, it is on hold.

Specifically, the updated regulations would increase the minimum salary level for employees to qualify for “exempt” status from minimum wage and overtime requirements under the executive, administrative and professional exemptions to the FLSA, referred to as the EAP Exemptions. Currently, an employee must be paid at least $455 per week ($23,600 annually) to satisfy the salary level requirement of the EAP Exemptions.

Under the updated regulations, to qualify for “exempt” status from minimum wage and overtime requirements an employee must be paid at least $921 per week ($47,892 annually.) The DOL implemented these updates to the EAP Exemptions after President Obama issued a memorandum asking the DOL to “modernize and streamline the existing overtime regulations for executive, administrative and professional employees” because the current regulations “have not kept up with our modern economy.”

While these updated regulations caused significant buzz and forced many employers to consider how the new salary level test would impact their workforce and bottom line, employers were granted a temporary reprieve. On November 22, 2016 the U.S. District Court for the Eastern District of Texas, Sherman Division, entered a Memorandum Opinion and Order granting an Emergency Motion for Preliminary Injunction, filed by the State of Nevada and 20 other states. Pursuant to that Order, these “modernized” regulations have not been implemented. In its Order, the Court stated that the DOL exceeded its “delegated authority” and enjoined the DOL from putting them into effect as planned.

While the Order represents a temporary reprieve for employers, the future of this issue is murky. And although traditional logic dictates the DOL would defend the updated regulations by appealing the Order, or at the very least seeking an expedited trial setting to obtain a more favorable final resolution, there is no guarantee the DOL will do so because the matter was initially raised by the White House in 2014. Now, as we begin a transition of power of both the DOL and the West Wing, it is uncertain whether President Trump’s DOL will defend the updated regulations to the EAP Exemptions.

Unfortunately, many employers had already begun efforts to comply with the proposed regulations. The Court’s Order leaves these employers, and others, in a holding pattern because the future of the EAP Exemptions is unknown.

What we do know is that employers do not have to implement any changes immediately. Keep apprised of any further comments from the Court and, just as importantly, comments from the new DOL administration once it is in power in January.