Federal Court Strikes Down Department of Labor’s “White Collar” Overtime Rule

On August 31st the U.S. District Court for the Eastern District of Texas struck down the Obama administration’s rule that expanded overtime protections of “white collar” workers. The overtime regulation that was overruled would have expanded federal overtime regulations to four million more employees and would have doubled the pay minimum for exempted “executive, administrative, and professional” employees from overtime pay. Specifically, if the “white collar” overtime rule went into effect, it would have doubled the minimum salary for exempt employees from $23,660 to $47,476 - meaning that employers would have to start paying overtime to over four million more workers that were previous exempted, creating a payroll issue for employers.

In the court’s decision, it held that the Department of Labor exceeded its authority by raising the salary threshold too high by doubling it. The court found that the increased salary level was invalid because it was too high and excluded too many employees who would have satisfied the duties test. The court made it clear that the test of whether an employee’s duties meet the “white collar” exemption is what job duties they are assigned, not how much they are paid. Specifically, Judge Mazzant said “the department creates a final rule that makes overtime status depend predominately on a minimum salary level, thereby supplanting an analysis of an employee’s job duties.”

Furthermore, the court made it clear that this decision protects all business and state governments throughout the United States from the “white collar” exemption. So, where does this ruling leave employers currently and in the future? Currently, the old rule from 2004 will still be in place, so employers will not have to change any of their current overtime policies. However, under the Trump administration it is possible that the DOL could promulgate a new rule with a revised minimum salary level. The new Secretary of Labor, Alexander Acosta, hinted that it is highly probable that this could happen and that the salary could be increased.