Finance News & Insights

OT rule essentially dead, and the feds want your help drafting a new one

Good news for Finance: The current version of the DOL’s overtime rule is all but dead.
As of press time, DOL’s secretary Acosta testified before the House Subcommittee for Labor, Health & Human Resources, Education and Related Agencies of the Appropriations Committee that the agency will be filing a Request for Information (RFI) “in the next two
to three weeks.”

Lower threshold likely

The RFI would be a way to solicit feedback from the public on the salary increase in the OT rule.
This is significant because RFIs are generally used by agencies before issuing a formal proposed reg.

In other words, the DOL is likely to issue a new OT rule with a different and likely lower salary threshold moving forward.

Acosta himself criticized the agency’s current overtime increase by saying that doubling the salary requirement in one shot “created a shock to the system.”

The DOL rule, which was delayed by a court injunction, was to take effect Dec. 1, 2016, and would have doubled to $47,476 the maximum salary a worker can earn and still be eligible for mandatory overtime pay.

How we got here

Judge Amos L. Mazzant, III, of the U.S. District Court for the Eastern District of Texas, Sherman Division — after hearing arguments from the DOL, as well as the 21 states and more than 50 business groups challenging the DOL’s changes to the overtime exemption salary threshold — issued a preliminary injunction against the changes.

The injunction doesn’t kill the rule changes. It simply halts them from becoming effective on December 1, the original compliance deadline. Whether or not the rule changes take effect, and when, will be determined at a later date in court. The injunction sets the stage for a future court battle, during which the judge will rule on the merits of the states’ and business groups’ lawsuit against the DOL.

But if the judge’s language in the injunction ruling is any indication, it sounds as though he’s likely to strike down the rule changes.

Mazzant ruled the DOL exceeded its authority by raising the overtime salary limit so significantly (from $23,660 to $47,476). He said the DOL’s rule changes, essentially, made the exemption test a one-factor test based on salary alone. He said the changes basically eliminated the duties test, and he said the DOL must examine the duties of employees to determine who falls within the FLSA’s overtime exemption.

Following the injunction, there was a series of delay to the court’s ruling on the overtime law’s fate.

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