Long-awaited proposed OT rule headed to OMB for review
Wednesday, January 23, 2019

Long-awaited proposed OT rule headed to OMB for review

By Payroll and Entitlements Editorial Staff

The Department of Labor’s long-awaited proposed rule that would revise the so-called "white collar" overtime exemption to raise the salary threshold at which executive, administrative, professional, outside sales, and computer employees would be exempt from overtime pay requirements has been submitted to the Office of Management and Budget (OMB).

While the amount of the proposed salary threshold is unknown, at his Senate confirmation hearing on March 22, 2017, Labor Secretary Alexander Acosta said that an appropriate threshold would be about $33,000 annually. This would be a significant drop from the $47,476 set in the Obama Administration’s final rule that was blocked by a federal court in Texas. Prior to the Obama-era rule that was blocked, the threshold was $23,660.

Proposed rule on the horizon. The new overtime salary threshold has long been in the making. On July 26, 2017, the DOL issued a request for information on defining and delimiting the exemptions for executive, administrative, professional, outside sales, and computer employees (EAP). The comment period ended September 25, 2017. In the DOL’s 2018 Fall Agency List, the Wage and Hour Division said that it expected to issue a notice of proposed rulemaking in March 2019.

Now that the draft proposal is set for OMB review, we can expect the proposed overtime rule to be released fairly soon, but how soon is anybody’s guess, especially given that we are in the midst of a partial federal government shutdown.

Earlier rule. The Obama-era final rule would have gone into effect December 1, 2016. It would have set the salary floor below which overtime must be paid to white-collar employees at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region. This would have resulted in a salary floor increase from $23,660 to $47,476 annually.

But in November 2016, a Texas federal court granted an emergency motion for a preliminary injunction in a consolidated case challenging the rule brought by 21 states (and a business coalition), ruling that "Congress intended the EAP exemption to depend on an employee’s duties rather than an employee’s salary."

On August 31, 2017, the court granted summary judgment to the plaintiffs, invalidating the final rule, and entering final judgment on that order.

Appeal dropped. The DOL initially appealed to the Fifth Circuit, but on September 6, 2017, at the DOL’s request, the court dismissed the appeal, and denied as moot the department’s motion to cancel oral argument and hold the cases in abeyance pending party discussions.

Stay of contempt order. Meanwhile, the district court on August 1 entered a stay of the contempt order it issued against plaintiffs who sued Chipotle for overtime wages based on criteria contained in the then-enjoined rule. That stay remains in effect, pending appeal of the contempt order. "Here, the primary issue presented on appeal—whether the third-party Respondents are subject to contempt for violating the Court’s Injunction against the enactment and enforcement of a federal agency’s rule—is serious to both the litigants and to the public at large," wrote the court.

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