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In May 2016, new overtime regulations were finalized by the Department of Labor (DOL). The overtime regulations will raise the minimum threshold from $23,660 ($455 per week), to $47,472 annually ($913 per week). In November 2016, the U.S. District Court in the Eastern District of Texas granted a nationwide preliminary injunction from the implementation of the Department of Labor’s final overtime rule, where a decision is still pending.
The regulations are in response to a 2014 directive by President Obama to update overtime rules under the federal Fair Labor Standards Act (FLSA). FLSA guarantees overtime pay at a rate of one and one-half the employee’s regular rate of pay for hours worked in excess of 40 in a workweek. The current FLSA has a salary threshold of $23,660 annually ($455 per week), meaning ANY employee making less is eligible for overtime. Employees making over the $23,660 annual threshold are eligible for overtime unless they fall under a specific industry exemption (teachers, doctors, lawyers) or the “white collar exemption.” These exemptions include; executive, administrative, professional, outside sales and computer employees.
The DOL final rule will raise the minimum threshold to approximately $47,472 annually ($913 per week) in 2016. This new proposed level is equal to the 40th percentile of weekly earnings for full-time salaried workers in the lowest wage census region. The threshold will be indexed to maintain the salary threshold at the 40th percentile every three years. The DOL estimated that approximately 4.6 million employees that are currently exempt based on the $23,660 threshold, will become eligible for overtime under the $47,472 threshold. The rule was scheduled to go into effect on December 1, 2016.
In November 2016, the U.S. District Court in the Eastern District of Texas granted a nationwide preliminary injunction from the implementation of the Department of Labor’s final overtime rule. The Court determined that implementation of the final rule on December 1st would cause irreparable harm while agreeing with the plaintiffs that the Department of Labor exceeded their statutory authority pursuant to the FLSA. While the overtime increase remains in court the Trump Administration has signaled they support some increase due to inflation but not as drastic as proposed under President Obama.