In its latest regulatory agenda, the US Department of Labor announced its intent to issue a Notice of Proposed Rulemaking for a new overtime salary threshold sometime next January. The Trump administration had first signaled its interest in rewriting the overtime rule last July, when the Justice Department expressed that intent in a court filing and the Labor Department issued a request for comments from the public—the first step in the federal government’s rulemaking process.
A new overtime rule issued by the Obama administration in 2016 raised the salary threshold at which employees are exempt from overtime pay from $23,660 to $47,476, but was blocked from going into effect by the courts and ultimately overturned by a federal judge in Texas last September, who found that the department had erred in setting the new rules for overtime eligibility based on salaries alone and not job descriptions.
The Labor Department appealed that judgment, not because it intends to maintain the previous administration’s rule, but rather out of concern that the ruling would hinder its ability to rewrite it. Current Labor Secretary Alexander Acosta had been critical of his predecessor’s decision to raise the threshold dramatically, indicating in his confirmation hearing last year that he thought an increase was needed but that doubling it all at once would put undue stress on the economy.
Employers may have hoped for a slightly speedier regulatory process, SHRM’s Lisa Nagele-Piazza reports, but now can likely expect a final new rule within two years, giving them plenty of time to prepare for what will probably be a less onerous new standard than the Obama administration’s:
Pennsylvania Governor Tom Wolf announced earlier this month that he had directed labor regulators to devise a plan to clarify the duties test in the state’s overtime regulations and raise the salary threshold at which employees become exempt from overtime, the Pittsburgh Post-Gazette’s Daniel Moore reported:
The proposal, which expands overtime in phases over three years, would raise the amount that certain salaried employees can earn and still qualify for overtime pay. Beginning Jan. 1, 2020, the state would raise the salary limit to $31,720, or $610 per week. The threshold will increase to $39,832 on Jan. 1, 2021, followed by $47,892 in 2022, which the Wolf administration estimates will extend overtime eligibility to up to 460,000 workers.
But the proposal’s future could hinge on the outcome of the gubernatorial election, as Gov. Wolf faces multiple Republican challengers in a re-election battle this year. The governor has unsuccessfully pressed the legislature to pass an increase in the minimum wage, which sits at $7.25 an hour, the lowest allowed by federal standards.
The Pennsylvania Department of Labor & Industry is expected to publish an initial proposal for public comments in March. Wolf’s proposal is similar to the new overtime rule the Obama administration attempted to enact in 2016, which was set to abruptly raise the overtime salary threshold from $23,660 to $47,476 until a federal judge invalidated it last August.
The US Labor Department will appeal a ruling handed down by a federal judge in Texas earlier this year, striking down the controversial new overtime rule put in place by the previous administration, the Washington Examiner reports:
The department will ask that the district court’s August ruling by stayed while it establishes a new overtime rule. The Trump administration is still expected to significantly scale back the rule.
Labor Secretary Alexander Acosta has repeatedly said that the Obama administration went too far when it expanded the rule, which extended overtime eligibility to an estimated 4 million more workers, but also that the rule itself was nevertheless in need of updating. He has suggested that a more moderate expansion would be appropriate.
A drawn-out court process could extend the duration of the uncertainty employers are currently facing as to the future of this regulation. Labor Secretary Alexander Acosta, appointed by President Donald Trump in March, has indeed been a critic of the Obama administration’s rule, which would have more than doubled the overtime salary threshold from $23,660 to $47,476. Before the judgment handed down in August, the Trump Administration signaled that it planned to rewrite the rule and Acosta’s department began the process of doing so with a solicitation of public comments in July.
The new overtime rule proposed by the Obama administration last year, which would have increased the overtime salary threshold from $23,660 to $47,476, currently looks very unlikely to come into effect in its original form. A federal judge in Texas struck the rule down in September, finding that the Labor Department had erred in setting the new rules for overtime eligibility based on salaries alone and not job descriptions. Meanwhile, the department’s new leadership under Labor Secretary Alexander Acosta has signaled that it would rewrite the rule to make it less burdensome to employers, issuing a request for comments in July as it began a process of reviewing the regulation.
Nonetheless, policymakers, including Acosta himself, agree that the overtime threshold is overdue for some kind of increase, and most observers believe the Labor Department is likely to adopt a new rule that raises the threshold less dramatically, either through incremental increases or different salary tests depending on location, company size, or type of role.
Employers who had hoped to rest easy after the Obama-era rule was held up in court still face an uncertain change in regulation in the coming year, including the possibility that Acosta chooses to appeal the ruling against the 2016 rule. Erin Mulvaney discusses that uncertainty at the National Law Journal:
“Employers have been left in limbo,” said Lori Brown, president and chief operating officer of Compliance HR at a webinar this week that highlighted issues about the overtime rule. “It’s an ever-changing compliance dilemma.” …
After a year of controversy, litigation, and delays, the new overtime rule created by the US Department of Labor under the Obama administration last year has now been thoroughly defeated. US District Judge Amos Mazzant, who issued a preliminary injunction last November blocking the rule from coming into effect as scheduled in December 2016, has issued a final ruling and struck the rule down entirely, finding that the Labor Department erred in setting the new rules for overtime eligibility based on salaries alone and not job descriptions, The Hill reported late Thursday:
The judge’s ruling was celebrated by industry groups, including the Restaurant Law Center, which represents the restaurant industry. In a statement to The Hill, the group said the Obama administration “overstepped its authority.”
“The Department of Labor under the previous administration overstepped its authority in making changes to the federal overtime rule. Today’s decision to invalidate the rule demonstrates the negative impacts these regulations would have had on businesses and their workers. We will continue to work with [the Department of Labor] on behalf of the restaurant industry to ensure workable changes to the overtime rule are enacted,” the group said in a statement.
To some extent, Mazzant’s ruling is redundant, as the Trump administration had already announced that it was rewriting the rule and issued a request for public comments as a first step toward amending it. The decision will put some constraints on that rewrite, employment lawyer Eric B. Meyer tells HR Dive, but won’t prevent the Labor Department from updating the overtime salary threshold in the more restrained manner its current leadership envisions:
Mark Van Scyoc/Shutterstock.com
The US Department of Labor has begun the process of revising or reversing the controversial new overtime rule enacted by the Obama administration last year, which would have raised the salary threshold at which employees are exempt from overtime pay from $23,660 to $47,476, but was held up in court before coming into effect. The Trump administration indicated earlier this month that it was planning to rewrite the rule, and on Tuesday, the Labor Department issued a request for information, soliciting public comments on the rule as a first step toward amending it, Reuters reported.
Specifically, the department is asking for input on whether and how to update the current salary threshold, or whether to eliminate the threshold entirely and base overtime eligibility solely on the “duties test.” It also wants to know how last year’s rule change and the injunction blocking it affected employers, many of whom raised salaries in anticipation of the rule and in some cases intend to keep those raises in place regardless of what happens in Washington. At TLNT, Seyfarth Shaw attorney Alex Passantino, a former acting administrator of the DOL’s Wage and Hour Division, provides a detailed overview of the questions included in the RFI, such as:
- Should the 2004 salary test be updated based on inflation? If so, which measure of inflation?
- Would duties test changes be necessary if the increase was based on inflation?
- Should there be multiple salary levels in the regulations? Would differences in salary level based on employer size or locality be useful and/or viable?
- Should the Department return to its pre-2004 standard of having different salary levels based on whether the exemption asserted was the executive/administrative vs. the professional?
The question of whether to differentiate salary thresholds by local cost of living is potentially the key innovation in the Trump administration’s proposed overhaul of the rule. Talking to SHRM’s Allen Smith, Passantino and other employment attorneys discuss how this might work—or indeed, whether it would work at all:
President Donald Trump’s administration said in a court filing last week that it intends to rethink the controversial new US overtime rule developed by the previous administration last year, the Washington Examiner reports:
Justice Department lawyers … defended the prior administration from charges that it violated the Administrative Procedures Act, which covers federal rulemakings, but also said the current administration would rethink the rule.
“The department has decided not to advocate for the specific salary level ($913 per week) set in the final rule at this time and intends to undertake further rulemaking to determine what the salary level should be. Accordingly, the department requests that this court address only the threshold legal question of the department’s statutory authority to set a salary level,” the lawyers stated. Restarting the public question process is a prerequisite before the department can overturn it and establish a new threshold. The Justice Department did not indicate what the administration thought the new level would be.
In the new rule drafted in the final year of Barack Obama’s presidency, the Labor Department had sought to raise the salary threshold at which employees are exempt from overtime pay from $23,660 to $47,476, but the new rule was challenged in court, blocking its implementation and keeping it tied up in litigation until the White House changed hands in January. Trump himself did not stake out a firm position on the rule during last year’s presidential campaign, but his Labor Secretary Alexander Acosta touched on it in his confirmation hearing, saying that the threshold was overdue for an update but expressing concern that doubling it all at once would put undue stress on the economy.