On August 31st, the Judge in charge of the court case for the new OT rules initiated by President Obama issued its final ruling. Basically he sided with the plaintiffs. For an excellent recap of the ruling I am referring you to Bill Pokorny’s blog.
The latest on the salary increase was released today. The U.S. Department of Labor has today announced that it will publish a Request for Information (RFI), Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees. The RFI offers the public the opportunity to provide information that will aid the Department in formulating a proposal to revise these regulations. The RFI solicits feedback on questions related to the salary level test, the duties test, inclusion of non-discretionary bonuses and incentive payments to satisfy a portion of the salary level, the salary test for highly compensated employees, and automatic updating of the salary level tests. The 60-day comment period for all issues raised in the RFI ends on September 25, 2017. The public may submit comments according to the instructions listed in the RFI as published in the Federal Register.
But the court case is still raging on. The DOL has decided to fight the ruling, not to defend the limits set by the Obama administration, but to defend the concept that the DOL has the right to change the salary limit. Lots of legal blogging on the topic so I wanted to include some of those blogs for you today:
On November 22, 2016, U.S. District Court Judge Amos Mazzant granted an Emergency Motion for Preliminary Injunction and thereby enjoined the Department of Labor from implementing and enforcing the Overtime Final Rule on December 1, 2016. The case was heard in the United States District Court, Eastern District of Texas, Sherman Division (State of Nevada ET AL v. United States Department of Labor ET AL No: 4:16-CV-00731). The DOL has issued the following concerning the ruling:
The rule updated the standard salary level and provided a method to keep the salary level current to better effectuate Congress’s intent to exempt bona fide white collar workers from overtime protections.
On December 1, 2016, the Department of Justice on behalf of the Department of Labor filed a notice to appeal the preliminary injunction to the U.S. Circuit Court of Appeals for the Fifth Circuit.
Since 1940, the Department’s regulations have generally required each of three tests to be met for the FLSA’s executive, administrative, and professional (EAP) exemption to apply: (1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (“salary basis test”); (2) the amount of salary paid must meet a minimum specified amount (“salary level test”); and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations (“duties test”). The Department has always recognized that the salary level test works in tandem with the duties tests to identify bona fide EAP employees. The Department has updated the salary level requirements seven times since 1938.
The Department strongly disagrees with the decision by the court. The Department’s Overtime Final Rule is the result of a comprehensive, inclusive rule-making process, and we remain confident in the legality of all aspects of the rule.
A federal judge has blocked, for now, the new salary level test that was to go into effect December 1st. Here is an excellent blog post on what exactly that could mean for employers. The blog is by Bill Pokomy, Staci Ketay Rotman and Erin Fowler of FranczekRadelet.
With the election over and the new administration beginning work on forming one question comes to mind to a lot of payroll professionals. How will the Trump administration affect wage and hour law? I would normally have written this blog myself giving you my opinion. But this morning I received an excellent blog post on this, that I think nails the questions and takes a shot at answering them in these early days. Bill Pokorny of FranczekRadelet’s blog post “What Will The Trump Administration Mean for Wage and Hour Law” this morning is a good read for payroll professionals who are looking ahead to 2017.
The battle over the new overtime rules set to take effect on December 1 is still raging on. In addition to the court case by 21 states, the House of Representatives has now entered the battle. With a 246-177 vote on September 28, the House passed a measure that would delay the implementation of the final overtime rule for six months. The bill, know as the Regulatory Relief for Small Businesses, Schools, and Nonprofits Act, H.R. 6094, was passed one day after the court case for the states. The sponsors of the bill state that by delaying the implementation of the final rule on overtime, this will give workers, small businesses, nonprofits and colleges and universities more time to prepare for the “dramatic changes” resulting from the rule. The bill has been sent to the Senate for consideration.
What do you think? Should the implementation be delayed to allow extra time? Or could all of these types of employers simply make those employees affected hourly thereby not having to worry about the salary level? Or is this a political ploy to have the implementation after the end of the current administration? Answer our poll.and/or give us your comments.
The battle to stop the new overtime rules from taking effect has begun in earnest. 21 states, including Arizona, Kansas, Oklahoma, Nevada, Texas and Utah, and the U.S. Chamber of Commerce have filed a lawsuit in Texas challenging the Department of Labor’s (DOL) final overtime rules under the Tenth Amendment of the U.S. Constitution and the Administrative Procedures Act. Nevada Attorney General Adam Paul Laxalt led the coalition of states filing the suit. According to the suit the final rule contradicts the statutory text of the exemption, as well as Congressional intent. The suit also raises the specter of the federal executive depleting state budgets in an effort to impose its policy will on the states.
However the DOL has responded by issuing the following statement by Secretary Tom Perez: “We are confident in the legality of all aspects of our final overtime rule. It is the result of a comprehensive, inclusive rule-making process. Despite the sound legal and policy footing on which the rule is constructed, the same interests that have stood in the way of middle-class Americans getting paid when they work extra are continuing their obstructionist tactics. Partisan lawsuits filed today by 21 states and the U.S. Chamber of Commerce seek to prevent the Obama administration from making sure a long day’s work is rewarded with fair pay. The overtime rule is designed to restore the intent of the Fair Labor Standards Act, the crown jewel of worker protections in the United States. The crown jewel has lost its luster over the years: in 1975, 62 percent of full time salaried workers had overtime protections based on their pay; today, just 7 percent have those protections – meaning that too few people are getting the overtime that the Fair Labor Standards Act intended. I look forward to vigorously defending our efforts to give more hardworking people a meaningful chance to get by.”
Let’s see where the battle takes us by December 1!
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We all knew that when President Obama called for changes to the exempt rules under the FLSA and the Department of Labor began the process of implementing those changes that there would be challenges by Congress. The “Overtime Reform and Enhancement Act” was introduced on Friday, July 15th. The bill requires the salary level changes be done in increments and does away with the automatic updates. But does Congress have history on their side to actually challenge the new rules? If we look at history, the answer is no. History is on President Obama’s side, even for the automatic updates, which have been proposed in the past several times. Changes of the nature being done (raising the salary level) have always been under the purview of Presidents, their Secretaries of Labor and their Administrators for the Wage and Hour Division. They have however, been few and far between. The first level was set at $30 per week in 1938 under President Franklin Roosevelt and his Administrator Elmer F. Andrews. It slowly raised up over the course of the years, often with professional and administrative employees being paid more. It was increased to $55/$75 per week in 1949 under President Truman and his Administrator William R. McComb; to $80/$95 per week in 1959 under President Eisenhower and his Administrator Clarence Lundquist; to $100 per week for executives and administrative, $115 per week for professional in 1963 under President Kennedy and his Administrator Clarence Lundquist. In 1969 hearings were held again to increase the salary level. This time they would increase to $125 per week for executive and administrative and $140 for professional employees beginning in early 1970 under President Johnson and his Administrator Robert D. Moran. During the hearings it was suggested by union leaders that there be a mechanism put in place to increase the salary level automatically to eliminate the lengthy periods which normally occur between revisions, thus keeping the salaries current and meaningful. But this was not incorporated. Amazingly enough there were only two changes to the salary level since 1970. First under President Ford (begun under President Nixon) in 1975 and then again under President George W. Bush in 2004. Under Ford and Administrator Betty Southard Murphy they were raised to $155 per week for executive and administrative employees and $170 for professionals effective April 1975. Again at this time Murphy pointed out that the thresholds had last been updated in 1970 and were increasingly out of date. She referenced that the Consumer Price Index may be utilized as the basis for updating the levels but did not include it in the final proposal. The salary level remained at those rates for the next 29 years.
The issue was not ignored by subsequent presidents it just never made it out of the regulatory agenda to fruition. It was proposed in 1979 under President Carter but tabled in 1985 under President Reagan. Under President Clinton it was put forth with a target date of September, 1993 but no action was ever taken on it. It remained on the agenda but no timetable was ever set. Then under President George W. Bush and his Administrator Tammy McCutchen, a major overhaul of all the requirements for exempt employees, including the salary level tests, were implemented. The salary level was raised to $455 per week for all exempt employees and a new category was added for the highly compensated. This category had a salary level of $100,000 per year. It was during this last update that Congress actually attempted to block the new regulations. Several amendments were added to various bills calling for defunding of the Department of Labor in an effort to stop the regulations from taking place. It was not the levels that were in dispute but the overall changes made to the jobs duties tests that caused the outcry from Congress. It was felt that too many employees would lose overtime protection under the new regulations. Stand alone bills were introduced as well as hearings conducting in both the house and senate. But in the end the regulations were implemented in April of 2004. This was the final update to the salary level until the new rules scheduled to take effect on December 1, 2016.
So the new proposed legislation of the “Overtime Reform and Enhancement Act” which is attempting to delay the implementation of the new salary levels does not have history on its side. Congress normally does not and generally cannot interfere with this type of regulation. But you never know in this day and age. We will just have to wait to see which side wins. But if history is any indicator, my money is on the DOL.