Back to the Drawing Board: Department of Labor’s “White Collar” Exemption Overtime Regulations
By David B. Walston, Partner
Is the Obama-era “white collar” overtime regulation dead? In practical terms, yes. You will recall from past updates, President Obama’s Department of Labor announced the implementation of a rule that would double the salary threshold for the “executive” and “administrative” exemptions from $23,660 per year to $47,476 per year. The increase was designed to reduce the number of employees exempt from overtime, but a federal court temporarily blocked its implementation (but did not invalidate the rule) before it became effective. Obama instructed the Department of Labor to appeal the judge’s decision, but the order blocking the rule remained in effect during the appeal.
Since the appeal, there has been much uncertainty about the fate of the “white collar” exemptions. Would the new Trump administration’s Secretary of Labor withdraw the appeal and concede the rule’s invalidity in court? Would the Secretary withdraw the rule entirely? Would Congress amend the Fair Labor Standards Act to address the issue?
Here is what did happen. Last week, the federal judge who temporarily blocked the rule from taking effect issued a decision invalidating the rule entirely. As an entirely new order, a new appeal would have to be filed by Trump’s Department of Labor. Trump’s Secretary of Labor Alex Acosta has not announced his intention to appeal or not to appeal, but the smart money is on “no appeal.” So, currently, the “white collar” exemptions remain under the same criteria in effect since 2004 with the salary threshold at $23,660 per year.
What does the future hold for the “white collar” exemptions? Again, the smart money says there will be an increase in the salary threshold. Secretary Acosta has commented that he would be open to an increase based on cost of living increases from 2004 – the year the salary threshold was set at $23,660. Based on the Cost of Living Adjustment (COLA) percentages used by the Social Security Administration, the salary threshold would be $30,040 today. Please note, this amount is speculation on my part, although my assumption is based on Secretary Acosta’s confirmation hearing comments. The salary threshold could be remain the same, be COLA-adjusted to $30,000, or be set higher. I would bet my own money that the potential increase will not be as high as 100 percent.