Federal Court Stops DOL Exempt Salary Changes

rebecca_watkinsOn December 1st, the Department of Labor’s new rule regarding exemptions from overtime was set to go into effect. A ruling from a federal court yesterday suspends that rule.

The DOL rule in question updated exemption rules that allow employees meeting both a salary test and duties test to be exempt from receiving overtime. The rule can be found at https://www.dol.gov/WHD/overtime/final2016/. It raises the salary test from $23,660 to $47,467 for most employees, and the salary test for “highly compensated employees” to $134,004. The rule ties the standard salary level to the 40th percentile of full time salaries of employees in the lowest census region, and ties the highly compensated employees salary level to the 90th percentile of full time salaries nationally. Under the rule, every three years these numbers would be automatically updated based on those percentiles.

Industry and employer groups filed a lawsuit challenging the DOL’s authority to issue the rule. A federal court in Texas just issued a temporary injunction, barring implementation of the rule while the court considers the challenge. As a result, employers can continue to rely on the existing salary level for their exempt employees until and if the court ultimately finds the rule valid. SBH will update employers about the status of the DOL rule as new information is learned.