Late last year, many employers were scrambling to comply with the new overtime rule which was scheduled to take effect on December 1, 2016. The new rule, which was near the top of the Obama administration’s labor agenda, would have more than doubled the overtime salary threshold under the Fair Labor Standards Act (FLSA) from $23,660 to $47,476. The rule was enjoined by a federal district court in Texas and the case is currently pending appeal with the Fifth Circuit Court of Appeals. In the interim, the Department of Labor (DOL) has issued a Request for Information (RFI) to the public which provides some insight as to how the new administration may handle the issue.
In late June, the DOL officially abandoned its position to raise the salary level to $47,476. The DOL informed the Court of Appeals that it intends to pursue new rule-making to set a more reasonable salary level and is now requesting the appellate court to simply confirm its authority to set a minimum salary level. Currently, the DOL does not intend to move forward with a new rule until this issue is resolved by the appellate court.
In the meantime, the DOL just issued a RFI and is seeking comments, data and information on the appropriate salary level for exempt employees. The DOL has submitted 11 comprehensive questions to the public, including the following:
- What is the methodology that the DOL should adopt to set the new salary threshold? Would updating the 2004 salary level [$455 per week/$23,660 per year] for inflation be an appropriate basis for setting a new salary level?
- Should the DOL adopt multiple salary levels (e.g., based on the size of the employer, the particular region, the industry, etc.)?
- Should different salary levels be set for executive, administrative and professional employees, and how would this impact employers and employees?
- At what salary level will the “duties test” not be deemed necessary to determine exempt status?
- To what extent did employers make changes in anticipation of the December 1, 2016 deadline and have employers since reversed their course of action since the rule has been enjoined?
- Should the DOL do away with the concept of a minimum salary threshold altogether?
- Should the standard salary level for exempt employees and highly-compensated employees be automatically updated on a periodic basis?
In addition to the above questions, the DOL posed questions relating to the various “duties tests” to determine exempt status under the FLSA. By issuing the RFI, the DOL has acknowledged that the public’s input is of great importance in developing future rule-making on this topic. The DOL’s recent actions also signal that it will back off significantly from the salary level previously adopted under the Obama administration. During his confirmation hearing, Labor Secretary Alexander Acosta stated that he would support a revised salary level in the low $30,000 range, which would account for inflation.
At this stage, it is fairly clear that the DOL will not be issuing new regulations while the case proceeds through the appellate court and while public comment is received and reviewed by the DOL. It is unlikely that the DOL will be taking any action during the remainder of this year. Based on the scope of the questions contained in the RFI, the next set of rules issued by the DOL will likely address a variety of topics including the “duties test” for various exemptions as well as appropriate salary levels.
We will continue to keep you posted on the latest developments.