In 2015 and 2016, the Obama administration’s Department of Labor (“DOL”) released proposed and final rules that were set to dramatically change the face of overtime exemptions by raising the threshold salary requirement to around $47,500. The Final Rule became effective as of December 1st, 2016, but several contemporaneous events have worked to upend the new regulation, and changes are afoot even now with respect to overtime. It’s time to take a quick look at the status of overtime regulations.
Overtime Exemption Salary Threshold: Where Do We Stand?
Just over a week before the Final Rule raising the overtime exemption was set to take effect, a federal judge in U.S. District Court in the Eastern District of Texas granted a nationwide preliminary injunction against the DOL’s implementation of the rule. The DOL appealed the rule to the Fifth Circuit, and it has now been granted three requests to delay the deadline for filings in the appeal as new leadership – Alexander Acosta, confirmed as Labor Secretary on April 27th – evaluates whether to proceed with the appeal.
That move leaves the Final Rule in limbo for the moment. Secretary Acosta noted that he found the threshold set by the DOL under the Obama administration too high, but he has signaled that current levels do not account for inflation. This may well be an indication that the DOL will continue in its attempts to raise the overtime exemption salary threshold, or, alternatively, the agency may respond favorably to policy arguments that the DOL lacks the authority to raise the threshold unilaterally and will simply decline to continue to defend the Final Rule. Either way, it seems unlikely the overtime exemption salary threshold in place in the Final Rule will actually see the light of day, despite technically taking effect on December 1, 2016.
A New Development in Overtime
Wage and hour law regarding overtime has seen other movement in recent days, and with support of the majority party and administration. On May 2nd, the U.S. House of Representatives voted to allow private sector employees to opt for “compensatory time (otherwise known as comp time)” at a rate of 1.5 hours per overtime hour worked in lieu of time-and-a-half pay. Public sector employees have been subject to a similar provision for over three decades. Under the bill, employers would be able to decide to offer the option of comp time to employees, but employees would still be able to choose between comp time or pay. Employees could also change their minds and “cash out” the comp time for paid overtime within 30 days. The White House has signaled its support for the bill, although its likelihood of passage in the Senate is unclear.