Recently, a Texas federal judge struck down an Obama administration Department of Labor rule that doubled the salary employees must make to be considered exempt from overtime pay. The rule’s invalidation should provide immediate relief to employers concerned about additional overtime pay, or increased salaries that the Obama administration’s overtime rule would have required.
In 2016, after years of consideration, the Obama administration issued the long-anticipated DOL rule that increased the minimum salary for exempt workers (workers exempt from receiving overtime pay) from $23,600 to just more than $47,000, and the minimum salary for workers who qualify for the “highly compensated” exemption from $100,000 to about $134,000. Late last year, U.S. District Judge Amos Mazzant issued a preliminary injunction that blocked the rule from coming into effect. Judge Mazzant granted summary judgment in favor of certain business groups that had challenged the Obama administration’s rule. Judge Mazzant reasoned that the significant salary increase would render the analysis of employees’ duties, functions, and tasks meaningless, and exclude from the exemption many employees who perform primarily exempt duties.
With the Obama administration rule invalidated, the previous minimum salary threshold of $23,600 went back into effect – at least for now. Current U.S. Secretary of Labor Alex Acosta, however, has mentioned on several occasions that the DOL will be seeking to revise the overtime rule and set a new salary threshold, which many observers believe will be somewhere between the previous level of $23,600 and the Obama administration level of just more than $47,000.
While the recent ruling reinstates the prior salary basis test for now, the DOL is likely to issue a new salary basis test in the future. Employers should continue to monitor this issue to ensure that exempt employees continue to remain exempt.