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Overtime Exemption Rules Update Halted by Federal Judge

Sep 13, 2017 1:23:00 PM

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Many American workers live the lyric from Billy Joel’s hit song, “Movin’ Out (Anthony’s Song)” wherein the piano man sings, “You can pay Uncle Sam with the overtime. Is that all you get for your money?” In truth, many workers depend on overtime wages guaranteed by the Fair Labor Standards Act (FLSA) to close the gaps in their family budgets or to generate a little extra scratch when unexpected expenses present themselves. So, whenever there’s a change in the laws governing overtime pay, workers and employers alike sit up and take notice. Here’s a bit of information on current overtime pay regulations and the recent activity surrounding proposed alteration to these rules.

Most workers already take for granted the “time and a half” rule for hourly workers who clock more than 40 hours in a work week. It should come as a relief that this rule was not under threat of modification in the current administration’s re-visitation of overtime rules under FSLA. The changes being considered focused more on modifying overtime rules as they apply to “exempt” employees.

Exempt employees are those paid a salary as opposed to an hourly wage by employers. Further, the salary must be greater than $23,600 annually (or $455 per week gross). This rule was designed to protect workers from being denied overtime benefits should an unscrupulous employer opt to pay all employees salary to expressly avoid paying overtime. Other exemptions from overtime are stipulated by the FSLA making those workers in executive, administrative, professional and “highly compensated employee” roles exempted from earning overtime pay. The Department of Labor defines each of these specially exempted roles in the overview document here. However, all one needs to know is that for each of these special exemptions, the same figures apply: $23,000 annually/$455 weekly.

These figures were precisely what was up for review and possible revision. The updated rule was supposed to take effect as of December 1, 2017 and would have effectively doubled the salary level for exemption to $913 per week, or $47,476 annually. This change would have made approximately 4.2 million more people eligible to receive overtime benefits. Proponents of the update say the salary levels for exempted employees—often in managerial and professional roles—was too low having not kept pace with inflation since it was last updated.

Court challenges from employers and staffing firms resulted in an injunction handed down Thursday by a federal judge in Texas, effectively halting the execution of the new rule. According to the Staffing Industry Analysts, Judge Amos Mazzant said in his order, that the DOL exceeded its authority by making salary level so high. “The final rule more than doubles the previous minimum salary level,” Mazzant wrote. “By raising the salary level in this manner, the department effectively eliminates a consideration of whether an employee performs ‘bona fide executive, administrative or professional capacity’ duties.” SIA notes that the injunction was largely a moot point since the Trump administration had already been considering a lower salary level.

So, stay tuned to see where the ball finally lands. While the injunction could potentially be overturned by a higher court, it doesn’t seem likely under our current leadership. However, there is a broad consensus that there should be some movement upward for the exemption salary cut-off level. We’ll keep our readers posted as this story continues to develop.

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Topics: Blog, Workforce Management

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