Are the New White-Collar Overtime Exemption Rules Finally Dead?

Are the New White-Collar Overtime Exemption Rules Finally Dead?

Can you believe it’s been nearly three and a half years since President Obama first directed the Secretary of Labor to update the white-collar overtime exemption regulations? Since then, employers endured the uncertainty of not knowing if, when or how they would be affected by the new overtime rules.

But now, at long last, it looks like employers can stop thinking and worrying about the 2016 white-collar overtime exemption regulations. Finally.

Recall that under the new regulations, which were published May 23, 2016, the minimum salary level for exempt white-collar employees increased from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). The new regulations also created an automatic updating mechanism that adjusts the minimum salary level every three years, starting January 1, 2020.

Shortly after the new regulations were published, two federal lawsuits challenging their validity were filed, one by a group of states and the other by a group of national business organizations. These two cases were later consolidated into a single case.

On November 22, 2016, the court in the consolidated case issued a temporary injunction blocking the new white-collar regulations from going into effect on December 1, 2016. The Department of Labor (Department) immediately appealed the injunction and requested expedited briefing. Though progress slowed when control over the Department passed from the Obama administration to the Trump administration, the appeal process continued.

Then, on August 31, 2017, the lower court essentially rendered the appeal moot when it ruled that the new white-collar overtime exemption regulations were invalid. According to the court, the new regulations were inconsistent with Congress’s unambiguous intent, which was to define the white-collar exemptions with regard to duties. As such, the Department exceeded its authority by essentially rendering an employee’s duties irrelevant when it more than doubled the previous minimum salary level.

“[T]the Department creates a Final Rule that makes overtime status depend predominately on a minimum salary level, thereby supplanting an analysis of an employee’s job duties. The Department estimates 4.2 million workers currently ineligible for overtime, and who fall below the minimum salary level, will automatically become eligible under the Final Rule without a change to their duties.”

Having determined that the Department lacks the authority to use a salary-level test that will effectively eliminate the duties test required by the Fair Labor Standards Act, the court deemed the Department’s new white-collar overtime exemption regulations invalid. Five days later, the Department voluntarily dismissed the appeal regarding the November 2016 injunction that prevented the new regulations from ever becoming effective.

For the time being, it looks like the prospect of new overtime exemption rules is gone. Since the new regulations never went into effect, the manner in which employers must evaluate and apply the white-collar overtime exemptions has not changed. Neither has the need for employers to consider Employment Practices Liability Insurance to protect against various employment-related claims, including limited coverage for wage and hour claims.

Please contact us if you would like to learn more about protecting your business with employment practices liability insurance.

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