The 2020 Mid-Year Economic Update_long

Death Knell for Obama Overtime Rule

Federal judge's ruling strikes down current rule, but alternatives may be on the horizon.
PublicPolicy-blog

The Obama administration's overtime rule took another step toward oblivion last week when a federal judge in Texas issued a summary judgment in favor of the Plano Chamber of Commerce and more than 55 business groups. The beleaguered rule, which was supposed to go into effect last December, would have extended overtime protections to millions of workers by more than doubling the minimum exemption salary.

"The Department (of Labor) has exceeded its authority and gone too far with the Final Rule," Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas said in the Aug. 31 ruling. A key issue in the ruling was the "unambiguous intent" of Congress in establishing overtime protections to provide exemption based on duties, not strictly salary.

While Mazzant concedes that salary has been used to help define employment levels, he notes that prior rules have specifically said it cannot be the sole basis for determination of overtime eligibility. "By raising the salary level in this manner, the Department effectively eliminates a consideration of whether an employee performs 'bona fide executive, administrative, or professional capacity' duties," he writes.

Because the initial injunction was issued just a week before the rule was to go into effect, many employers had already made changes to their compensation plans or overtime allowances. And most of the distributors I've talked to about this issue over the last year said they had no intentions of turning back the new rules if they'd already implemented them.

"That would just be bad for morale throughout the company," said one industrial distributor at the Industrial Supply Association annual conference in Denver, CO, earlier this year.

The future of the rule was already in question after Mazzant placed a temporary injunction on it last November. The Trump administration had also taken a stance that the new standards were too high. But there are signs that the Trump administration is considering its own changes to overtime.

"While today’s decision is favorable to employers, whether it is the 'final' nail for the minimum salary threshold originally proposed ($913 per week) remains to be seen," according to a legal alert issued by employment law firm Fisher Phillips.

If you already complied with the higher standards established by the Obama administration rules, chances are you'll be in compliance with anything else that comes down the pike from the current administration's DOL. But if you held off or rolled back any new policies, keep an eye out. New standards may still be in store in the not-too-distant future.

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