Insights: Article

Judge Overturns Overtime Pay Rule

September 13, 2017

On August 31, a federal judge in Texas granted summary judgment to states and business groups that had challenged a U.S. Department of Labor (DOL) rule that would have more than doubled the salary threshold for certain "white-collar" salaried employees to be exempt from overtime pay.

This action effectively strikes down the DOL's rule. In his ruling, the judge concluded the DOL had exceeded its authority in setting the increased salary level and providing for automatic adjustments every three years.

Prior Ruling
This past November, the same judge granted a preliminary injunction delaying the effective date of the rule. The rule was scheduled to be effective on December 1, 2016, and would have increased the annual salary level for overtime exemptions from $23,660 to $47,476. 

Anticipate a Revised Rule
To address the judge's concerns, the DOL plans to draft a new rule that both increases, more modestly, the salary threshold and revises the duties tests for white-collar employees to be exempt from overtime pay under the Fair Labor Standards Act (FLSA). In July, the DOL posted a "Request for Information" seeking public comment on the FSLA's minimum wage and overtime requirements for executive, administrative, professional, outside sales and computer employees. 

The deadline for submitting comments is September 25, 2017; the DOL's request can be found here. Many employers and trade groups have provided comments. Employers that have not yet submitted comments should consider doing so if overtime pay is a significant issue.

If you would like assistance with drafting comments to the DOL or have questions about the FLSA overtime rules, contact your tax professional.

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