US DOL’s “Final Rule” Struck Down: A History from a New York City Wage and Hour Attorney
U.S. Department of Labor’s “Final Rule” was Struck Down: What this Means from a New York City Wage and Hour Attorney
This is an interesting example how a law can influence change, even when that law is struck down and found improper. Scheduled to take effect on December 1, 2016, the U.S. Department of Labor (US DOL) implemented a “Final Rule” relating to the overtime exemption rules in the Fair Labor Standards Act (FLSA). This “Final Rule” addressed the employee exemptions to overtime and significantly changed the amount of annual salary that was required to deem an employee exempt from overtime. In fact, the rule approximately doubled it.
Recall, that administrative and executive employees may be exempt from overtime if they meet certain criteria or elements with the labor law. One of these elements was that an employee earned at least a amount of weekly wages. By doubling the wage requirement, it would include more people in the overtime scheme.
As time got closer to imposition on December 1, employers were required to notify employees of changed and implement changes. This required a lot of additional work and preparatory measures. Certain employees who fell short of the new weekly wage requirement would not be entitled to overtime.
However, on November 22, 2016, a U.S. District Court in Texas issued a nationwide preliminary injunction, which stopped the imposition of the “Final Rule.” Meaning that the double wage requirement for the exemption did not come into effect; the present rules would still govern.
At first glance this was great for employers because their salary costs would go down. After all, the overtime rate is 1.5 times the regular rate of pay. This can quickly become costly for a business, particularly for the administrative and executive staff that the business depends on. However, this left employers with a difficult choice because, if they do not implement the changes, it could affect employee morale. Further, the preliminary injunction could also be lifted requiring employers to immediately begin paying these rates.
Ultimately, the US District Court struck down the “Final Rule” this summer by determining that the USDOL exceeded its authority. Therefore, the new overtime measures did not come into effect.
Or did they? After the “Final Rule” was struck down, other states and cities followed suit and implemented many of the components in the federal “Final Rule.” Notably, New York City increased the salary threshold for employees to qualified for the executive and administrative exemptions. The increases were not as high as what the “Final Rule” proposed, but the increases were still significant enough to help employees.
This is an example that, even though the US DOL overstepped its bounds by promulgating the “Final Rule” for the FLSA, it was not unnoticed by the rest of the country who could freely adopt or reject the changes.
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