On Thursday, August 31, 2017, a Texas federal court prevented the federal Department of Labor (“DOL”) from implementing its new “overtime rule,” promulgated under the Obama Administration. The court struck down the entirety of the rule, which would have nearly doubled the salary that certain employees would need to earn in order to be “exempt” from overtime pay. In November of last year, the same court prevented the rule from going into effect pending the court’s final ruling. The court has now ruled that the Department of Labor exceeded its authority by creating the rule.
Specifically, the DOL’s new overtime rule would have required employers to pay overtime to employees in “executive, administrative, or professional” capacities, unless the employee earned at least $913 per week, or $47,476 per year. This “salary threshold” would have been more than double the current level of $455 per week, or $23,660 annually. The DOL’s overtime rule also would have effectively done away with measuring an employee’s duties in conjunction with an employee’s salary.
In striking down the rule, the court noted that the DOL does not have “the authority to categorically exclude those who perform bona fide executive, administrative, or professional capacity duties based on salary level alone.” Instead, the DOL’s sole reliance on salary “would essentially make an employee’s duties, functions, or tasks irrelevant.” The court therefore found the rule “unlawful” as it would have violated the FLSA.
The Trump Administration Labor Department is not anticipated to appeal the court’s ruling. In a related move, the Department of Justice (“DOJ”) indicated on September 5, 2017 that it will drop its appeal in a pending battle related to the overtime rule, likely signaling that the Texas federal court’s final blow to the controversial overtime rule will stand. The DOL is reportedly already reconsidering whether to issue a new rule with a less dramatic salary threshold.
Employers in New York state, however, must remain mindful of the New York Department of Labor’s own overtime rules and regulations. Under New York’s minimum wage and overtime regulations, employees in an executive or administrative capacity must earn much more than the $455 per week specified by federal regulations. To be exempt from overtime pay in New York state, the minimum salary for these employees varies based on the employer’s location in the state. For upstate employers, these employees must earn at least $727.50 per week in order to be exempt from overtime. For employers in the downstate area (Nassau, Suffolk, and Westchester counties), such employees must earn $750.00 per week. For New York City area employers, the minimum salary differs based on the employer’s size. For large employers in New York City, these employees must earn at least $825.00 per week to be exempt; employees of small employers in New York City must earn $787.50 per week.
These New York-specific levels went into effect in late December of last year, and will increase annually for the next four years. Moving forward, it is vital for New York employers to verify their employees’ exempt classifications and salaries.