District Judge Strikes Down FLSA Overtime Rule

In late August, a federal judge struck down the U.S. Department of Labor’s new overtime rule, which had been in a state of limbo for nearly a year.

In his decision, Judge Amos Mazzant ruled the DOL exceeded its authority and raised the overtime exemption limit so high that it would be impossible for employers to meet the agency’s own standards.

Federal overtime regulations

According to the Fair Labor Standards Act, employers must provide overtime pay to any non-exempt employees who work more than 40 hours in a single week. Several types of employees are exempt from this rule, including those who make fixed salaries and those who perform executive, administrative or professional duties. Also exempt are employees who make fixed salaries exceeding $455 per week.

Last year, the DOL attempted to adjust the minimum salary threshold to $915—more than double the current level. The agency also planned to raise the salary threshold again in 2020. At the time, the DOL estimated that an additional 4.2 million workers across the country would become eligible for overtime pay once it implemented the rule. The change would have mostly affected white-collar workers.

Business groups immediately challenged the rule change, and in late November 2016, the same district court judge suspended the rule through a preliminary injunction. This action occurred just days before December 1, when the rule was supposed to go into effect.

When the administration of Donald Trump took over in January, incoming Labor Secretary Alex Acosta expressed his opposition to the rule, although the agency continued to defend the policy in court.

A business community in limbo

It’s worth noting that Mazzant’s more recent ruling did not state that the DOL lacks the authority to raise the overtime pay threshold completely. Rather, the judge felt the agency overstepped its authority and raised it too much. Because of this, businesses nationwide still face some uncertainty regarding the future of the FLSA and the requirements they will need to meet in the future.

In the weeks since the August ruling, the DOL has issued a request for information seeking input on what should be included in a new overtime rule. Agency officials have said they wish to learn from their mistakes and avoid the problems associated with the previously proposed change.

Until there’s further clarity on this issue, businesses would do well to ensure they are classifying their employees appropriately and providing the right overtime compensation to the workers who are entitled to it. If you are concerned about these issues as you grow your company, make sure you have sound payroll and compliance processes in place.