On March 13, 2014, President Obama signed a presidential memorandum that directed the Department of Labor to devise new overtime rules that would make millions of employees eligible for time-and-half pay for overtime hours of work. At the time of the memorandum’s signing, salaried employees who made more than $455 per week or $23,660 a year were not eligible for overtime pay. In addition, “highly-compensated’ employees, individuals whose total compensation was $100,000 or more and who also satisfied a number of other conditions, also did not qualify for overtime pay. Subsequently, on May 18, 2016, the Department of Labor issued a revised rule that updated the overtime regulations. Most notably, the new changes included:
- Raising the salary ceiling under which employees are eligible for overtime pay from $23,660 to $47,476 a year, or from $455 to $913 a week.
- Updating the salary threshold every three years.
- Raising the “highly compensated employee” threshold from $100,000 to $134,004.
On November 22, 2016, nine days before the new regulations were to go into effect, a Texas federal judge issued a nationwide injunction against the updated regulations, effectively putting all changes on hold. Judge Amos L. Mazzant III of the Eastern District of Texas, ruled that the Obama administration may have exceeded its authority when it raised the overtime salary limit so significantly. The injunction stemmed from a lawsuit filed by 21 states and another one filed by a coalition of business groups, which were eventually consolidated. It is important to note that the injunction did not kill the rule; rather, it temporarily blocked the changes from taking place.
On December 1, 2016, the Department of Labor filed a notice of appeal in the United States Court of Appeals for the Fifth Circuit, indicating that the federal government intended to defend the new rule. Since then, the government has received two filing extensions and the Department of Justice has until May 1, 2017 to file a brief stating its position on the appeal. When requesting the first extension, the Department of Labor stated that the extension was necessary to “allow incoming leadership personnel adequate time to consider the issues.” At that time, Andrew Pudzer, a known critic of the new rule and the CEO of CKE Restaurants, was nominated by President Trump to become the Secretary of Labor. Given that Mr. Pudzer has since withdrawn his candidacy for the post, and that the President’s new nominee, U.S. Attorney for the Southern District of Florida, Alexander Acosta, has yet to be confirmed by the Senate, it is unclear what the Department intends to do next. Mr. Acosta has not previously expressed an opinion as to the new rule, adding to the uncertainty.
In view of this uncertainty, employers must wait to see whether the Department of Labor, under new leadership, decides to follow through with its appeal or to simply withdraw it and let the rule slowly die off. It is also possible that the Department of Labor will go back to the drawing board and draft a new rule that is more palatable to employers. We will continue to monitor the Department of Labor’s approach to this matter, which has significant ramifications for employers and their businesses.
