by Ruben J. Garcia, Professor of Law, University of Nevada Las Vegas William S. Boyd School of Law
Today, Dec. 1, was the day that the Obama Administration’s revision to the overtime rules would have gone into effect, were it not for a nationwide injunction issued by a federal court last week. The revised rule aimed to increase the amount under which employees would be automatically eligible for overtime pay for hours worked over 40 in a week. The rule required all employees earning below $47,476 to be paid time and a half for hours worked over 40 in a work week. Now, those employees will only be eligible for overtime if they also meet the tests for exempt duties as promulgated by the U.S. Department of Labor (DOL), a subject of frequent litigation because of the inherently subjective elements the exempt duties tests.
On Nov. 22, a federal court in the Eastern District of Texas enjoined the DOL’s revision of the Rule which determine when an employee is “exempt” from the overtime pay requirements. Business groups complained primarily about the Rule’s index which would automatically keep the salary threshold in line with increases in cost of living—the absence of which has kept the minimum salary at a stagnant level for decades. States sued to block the rule principally on a federalism challenge, which was turned away by the federal court in short order based on Supreme Court precedents.
But the Court accepted the challenge of the states and the private plaintiffs under the Administrative Procedure Act, finding that the DOL went beyond its authority in setting the salary minimum at $47,476. On this theory, the DOL has a minimal role in filling out congressional intent about the extent of the overtime exemption for “bona fide executive, administrative, and professional” exemption from overtime requirements under the Fair Labor Standards Act of 1938. For decades, the DOL has set a presumptive salary threshold, beneath which workers are eligible for overtime regardless of their duties. Over that threshold, workers might be exempt if they perform sufficient duties. The revised rule did not affect the duties standards most recently revised in 2004 during the Bush administration. The 2016 revision, however, raised the salary threshold from $23,660 to $47,476. This doubling of the threshold beneath which employees are automatically entitled to overtime pay brought loud protests from the business community about how the increase would decrease the flexibility of employers and workers. Nonetheless, many employers increased employee salaries to ensure that workers would still be over the salary limit for the overtime exemption. Although the court expressly stated it was not challenging the authority of the DOL to set any threshold, the court did not say what salary level would have been reasonable.