As previously reported in the EPTW, the Trump administration was going to publish a Request for Information (RFI) on the White-Collar Overtime Exemption. It did so on July 26, 2017.  Previously, the Obama administration had published rules that would be effective December 1, 2017, that increased the exemption salary level test from $433/week up to $913/week with an escalation every three years.  This would have dramatically impacted employers.  Essentially most employees would become overtime eligible.

In December 2016 a federal district in the state of Texas enjoined the order. The decision found that the DOL was not authorized to include a significantly higher salary level test for “bona fide executive, administrative or professional employees” or to instruct that individuals paid below that new higher salary level could not be exempt from overtime pay.  In other words, the court found that the salary basis cannot be the primary driver of the overtime exemption and replace the duties test.

It is currently on appeal to the Federal 5^th Circuit Court of Appeals. In the meantime, the DOL wants to reevaluate the Fair Labor Standards Act exemptions and take a temperature of the employer community.  The law and initial regulations were issued in 1938.  The initial regulations had established $30 per week as a base for the administrative, executive and professional exemptions.  Since that time, the salary basis was increased to its current $455 per week.  The DOL on appeal limited its response that the court addresses only the threshold legal question of the DOL’s statutory authority to set a salary level, without addressing the specific salary level set by the 2016 final rule.

The RFI requests responses to the following question areas:

·       Should the 2004 salary test be updated based on inflation? If so, which measure of inflation?

·       Would duties test changes be necessary if the increase was based on inflation?

·       Should there be multiple salary levels in the regulations? Would differences in salary level based on employer size or locality be useful and/or viable?

·       Should the Department return to its pre-2004 standard of having different salary levels based on whether the exemption asserted was the executive/administrative vs. the professional?

·       Is the appropriate salary level based on the pre-2004 short test, the pre-2004 long test, or something different? Regardless of answer, would changes to the duties test be necessary to properly “line up” the exemption with the salary level?

·       Was the salary level set in 2016 so high as to effectively supplant the duties test? At what level does that happen?

·       What was the impact of the 2016 rule? Did employers make changes in anticipation of the rule? Were there salary increases, hourly rate changes, reductions in schedule, changes in policy? Did the injunction change that? Did employers revert back when the injunction was issued?

·       Would a duties-only test be preferable to the current model?

·       Were there specific industries/positions impacted? Which ones?

·       What about the 2016 provision that would permit up to 10% of the salary level to be satisfied with bonuses? Should the department keep that? Is 10% the right amount?

·       Should the highly compensated employee exemption salary level be indexed/how? Should it differ based on locality/employer size?

·       Should the salary levels be automatically updated? If so, how?

Comments are expected September 25, 2017– 60 days after the publication of the RFI.  If the 5^th Circuit upholds the authority of the DOL to increase the salary threshold, it is expected that Secretary of Labor Acosta will authorize withdrawal of the Obama era regulations and reissue new regulations on the salary basis.

Source:  Seyfarth Shaw 7/25/17, Morgan Lewis 11/23/16