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Published on Tuesday, July 11, 2017

U.S. DOL Walks a Fine Line as it “Walks Back” Overtime Rules

The US Department of Labor (DOL) is working toward rescinding its judicially enjoined overtime rules. These rules were published during the Obama Administration and dramatically increased the exemption salary level test from $433/week up to $913/week.  It was intended to reduce the number of jobs that could be classified non-exempt by employers. 

The salary level test is one of three tests a job must meet in order to be classified “bona fide executive, administrative, or professional” and exempt from the DOL minimum wage, overtime, and some record keeping requirements. The other two tests are the salary basis test and the job duties and responsibilities test.

The new salary level test was scheduled to be finalized last December 1st (2016), but a federal district court in Texas blocked the final rule based upon its determination the DOL was overstepping its powers. The regulatory power to control what positions are exempt and non-exempt by simply moving the salary level test did not sit well with the Court, and its decision noted that the US Supreme Court had found the law “intended the EAP (Executive, Administrative, and Professional) exemption to depend on an employee’s duties rather than an employee’s salary”  Therefore the District Court in Texas found that by raising the salary level to the extent that it supplanted the duties tests, the DOL had exceeded its authority and ignored Congress’s intent.

This Court found this rule so “off the path” that it disregarded the DOL’s regulatory authority and usual status as legal expert on interpreting the Fair Labor Standards Act (FLSA). This court deference is sometimes referred to as the Chevron deference. The Chevron deference rule holds that the regulatory agency, in this case the DOL, must give effect to Congress’ express intent of the law. If it does the Court will give its position weight in deciding the correct interpretation of the law.

So, facing a Judicial slapdown as well as a new Administration that does not see regulatory activism the same way, the DOL faces a ropewalk back. On one side trying to keep its authority to keep regulation intact, while on the other side attempting to find a salary level standard that is reasonable.  

The DOL filed an appeal brief to the Fifth Circuit Court of Appeals last week that states it “has decided not to advocate for the specific salary level ($913 per week) set in the final rule at this time and intends to undertake further rulemaking to determine what the salary level should be. Accordingly, the Department requests that this Court address only the threshold legal question of the Department’s statutory authority to set a salary level, without addressing the specific salary level set by the 2016 final rule.” State of Nevada v. U.S. Department of Labor.

The DOL has announced it sent a Request for Information to the Office of Management and Budget for a review of the rules. This is a first regulatory step toward rescission of the rules. The DOL again said it has the right to set the salary level test under the law, despite implicitly admitting the department itself makes errors. But regardless, the DOL should be provided deference as the authority on the FLSA.

In prognosticating what may happen going forward Jeffrey W. Brecher, Principal and Practice Group Leader of Jackson Lewis’ Wage and Hour Practice Group, had a more measured response, "The DOL’s brief states it is not going to issue a proposed rule until the litigation is resolved. So it could be some time before a new rule is issued. If the Fifth Circuit reverses, it is possible the preliminary injunction will be lifted and the salary level will go into effect (and possibly retroactive to the December 1, 2016, original effective date). However, the district court could also continue the injunction based on different grounds—i.e., that the salary level set by the Rule was arbitrary, an issue the DOL has specifically asked the Fifth Circuit not to address." 

Sources:   Employment Law Daily Alerts, WAGE-HOUR—EXEMPTIONS—E.D. Tex.: Federal judge blocks DOL overtime rule, (Nov. 23, 2016); State of Nevada v. U.S. Department of Labor; Agency will defend salary level in overtime appeal, but not the Obama-era level — FEDERAL NEWS  writer: Joy P. Waltemath, J.D.

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