Overtime Rule Struck Down

United States businesses and their workforce have been waiting for the final say in the overtime ruling since it was halted last November 2016. On August 31, 2017, the Overtime Final Rule was ruled to be invalid on the basis that the Department of Labor’s (DOL) authority level was exceeded in this regard.  U.S. District Court Judge Amos Mazzant granted the summary judgment in respect to this matter.

Originally, the DOL Overtime Rule stipulated that the minimum salary be raised from $23,660 to $47,476 to include almost 4 million workers to qualify for overtime compensation. It also set out automatic adjustments to the salary level to increase every three years. The salary threshold increase was said to be an excessive upsurge that would hurt many industries and businesses. Business groups and 21 states banded together to challenge the rule. These groups argued that many jobs would be lost, millions of dollars would be spent on overtime, and many managerial positions would have had to be demoted. They also claimed that with the overtime rule change would negate the stipulations for the “white collar” exemption. The FLSA specifies that an employee must be salaried in the amount of at least $23,660.00, and that they must perform certain duties. Incorporating these overtime rules into existing employee schedules would not be an easy feat for companies.

It has been stated that the salary level should be increased, but that $47,476 was too high an adjustment for an initial leap. The salary level for overtime pay regulations has not been adjusted since 2004 when it was set at $23,660. The court’s ruling has been stated as a win for businesses. Businesses now know that the Overtime Rule will not go any farther, and they can operate with more certainty.  On the flip side, the four million workers who would have benefited from this overtime change will remain ineligible. Arguments have been presented that instead of focusing on salary alone, job descriptions should also be analyzed. One can argue that the salary threshold unfairly excludes workers who do not perform management duties. Mazzant’s ruling concluded that the DOL does have the ability to use a salary test, but must also include workers’ duties in combination with salary to determine overtime eligibility.

With the court’s ruling, businesses for now can operate knowing they will not have to make changes to their operations. However, many companies had already begun to change positions or increase salaries for employees in preparation for complying with the DOL Overtime Rule. Some companies reclassified employees from exempt to nonexempt, and/or increased salaries above $47,476.  Reclassifying employees back to exempt, or decreasing their salary back to the original amount could cause distress to employees and affect their moral.  This leaves employers who had already made arrangements before the temporary halt last November in a sticky place.

Currently, the DOL is utilizing a request for information (RFI) from the public so they can see if changes need to be made to existing laws, or if a new rule needs to be put in place of current regulations. The 60-day RFI comment period began on July 26, 2017 and will close on September 25, 2017.

Want to get ahead of the curve? Try Snap Schedule Online Employee Scheduling Software.