TEXAS COURT NULLIFIES OBAMA-ERA OT RATE HIKE: WHAT’S NEXT?

On August 31, 2017, in Nevada v. U.S. Department of Labor, 2017 WL 3780085 (S.D. Tex.), a federal court in Texas formally nullified the Obama administration's dramatic revisions to the federal overtime rule.  The court held that the previous Administration exceeded the authority Congress gave it when it dramatically expanded the number of people entitled to overtime pay by more than doubling the minimum salary requirement for exemption. The same court had previously granted an injunction, preventing the rule from going into effect as scheduled late last year.  Many employers already had made big changes to comply with the anticipated rules.  But the Court's latest decision - capped by an announcement from the U.S. Department of Justice that it would not file an appeal, even though the previous administration had announced that it would appeal the injunction - made it final.  The $47,000+ minimum salary that employers would have had to pay in order for an employee to be considered exempt from overtime is no more:  the law now reverts to the former level of about $24,000, coupled with an examination of the employee's actual job duties.

Prior to the Court's ruling, Secretary of Labor Alexander Acosta already had published a notice indicating that the Department was contemplating changes to the new overtime rules.  The court's decision certainly relieves pressure to make further changes, but the Department of Labor (DOL) will likely decide to revisit the §541 regulations, last revamped in 2004 during the George W. Bush Administration.  A request for information is underway as the DOL suggests that it intends to build a record for new rule-making.  Some of the key issues include what methodology do you use for determining new salary thresholds as well as the impact on the companies that implemented the 2016 regulations anyway.  In his confirmation hearing, DOL Secretary Acosta suggested that the DOL may issue a new rule with a more moderate salary threshold increase, probably in the low $30,000 range.