One of the most significant wage and hour actions of the Obama administration—promulgating a new rule on overtime eligibility—remains frozen in legal limbo as the Trump administration decides whether to repeal and replace it or propose an alternative solution. With such uncertainty, what should employers do to ensure they are in compliance when the Trump administration finally takes action?
First, employers need to understand why the new overtime rule is not in effect. A federal district judge in Texas stayed the rule’s implementation on November 22, 2016, just nine days before it would have become effective nationwide. The judge held that the Department of Labor exceeded its regulatory authority by establishing a salary threshold under which employees were automatically overtime eligible regardless of their job duties. The Department of Justice appealed that decision, and the Texas AFL-CIO filed a pending motion to intervene in the event the Trump administration decides not to challenge the judge’s decision in the appeal’s court. After obtaining two filing extensions, the DOJ has until May 1 to file a brief stating its position on the appeal.
Second, employers should be aware of the Trump administration’s potential options. Its first decision is whether to defend the rule at the appellate level, first to the Court of Appeals for the Fifth Circuit, and then potentially to the U.S. Supreme Court. While that decision will not be publically announced until the May 1 filing, signs are suggesting that the DOJ will not defend the rule and will instead argue that the federal district judge’s opinion should stand.
The current administration’s second decision is whether the DOL should rescind the new overtime rule or promulgate a revised rule. Central to that decision is the perspective of the new proposed labor secretary nominee, Alexander Acosta. While it is unclear exactly what Mr. Acosta favors, multiple reports suggest a likely scenario that would involve the withdrawal of the current rule and the promulgation of a more modest proposed overtime rule with a reduced salary threshold. For example, some Republicans have discussed a new overtime salary threshold of $35,000 rather than $47,476. Because the new overtime rule is not effective, repeal and replacement of it can be accomplished by a notice published in the federal register rescinding the current proposed rule and providing a period of notice and comment for the administration’s new overtime rule.
Employers should continue to prepare for some type of increase in the overtime salary threshold. While it is unlikely that the Obama administration’s $47,476 overtime threshold will survive the current administration, it is probable that there will be a modest increase in the overtime threshold from its current $23,600. As a result, employers should be prepared to update plans to alter compensation and job duties of employees who could be implicated by an increase in the overtime threshold. The good news is that a more modest increase will likely affect fewer employees and cause employers less disruption. lowering employers’ compliance costs.
Drinker Biddle and Reath’s labor and employment attorneys will continue to monitor these developments and provide updates.