In December 2016, employers faced one of the most dramatic changes in the Fair Labor Standards Act (FLSA) in over 42 years. As a brief background, the FLSA establishes the federal minimum wage for all hours worked (currently $7.25 an hour), and overtime premium pay at one and one-half times an employee’s regular pay rate for worked hours exceeding 40 in one work week. The FLSA also exempts from overtime payments “any employee employed in a bona fide executive, administrative, or professional capacity”, generally referred to as the white collar exemption. Two of the three criteria for an employee to meet the white collar exemption is that the employee must be paid on a salary basis, and the salary must meet a minimum specified salary amount. The latter is known as the salary level test. The salary level test has been set at $455 weekly or $23,660 annualized, for some time.
In 2016, the Department of Labor under the Obama Administration increased the salary level test, more than doubling it, to $47,476 per year. This new salary threshold would have drastically expanded the number of employees eligible for overtime pay. Although scheduled to be effective December 1, 2016, causing a panic attack with employers, it was blocked from enforcement, when a nationwide preliminary injunction was issued by a federal court in Texas (which is in the Fifth Circuit). The preliminary injunction was appealed and is still pending today.
However, what the Trump Administration’s Department of Labor has decided to do is ask the Court not to address the validity of the 2016 rule and salary level test. This will give the DOL an opportunity to revisit the issue through new rulemaking. This request is in line with President Trump’s charge for federal agencies to review regulations with a focus on lowering regulatory burden.
On July 25, the DOL 25 issued a Request for Information (RFI). An RFI is an opportunity for the public to provide data and information that may be used to revise a rule. The RFI seeks comments on a variety of topics under the FLSA, but basically focusing on the salary level test which has been on hold.
Some of the issues for which the RFI seeks comment are:
- Whether the salary test should be updated based on inflation;
- Whether there should be a multiple salary level test and whether differences in employer size or locality should matter;
- What the impact of the 2016 rule was and did employers make changes in anticipation of the rule;
- Were specific industries/positions impacted more than others;
- Was the provision permitting 10% of the salary level test to be satisfied with bonuses appropriate; and
- Should the salary levels be automatically updated?
Of course, the merit of these comments will be dependent on the Fifth Circuit’s decision on whether the salary test is permissible to begin with. A favorable determination will provide the Department with information to proceed on a new rulemaking. Employers should continue to watch this issue until finalized.