The federal judge in Texas who temporarily enjoined the Obama Administration’s Overtime Final Rule late last year ruled this week that the Final Rule is invalid because the U.S. Department of Labor exceeded its authority in setting a high salary-level test that denied exempt status to executive, administrative, and professional employees without regard to their job duties. The judge interpreted the Fair Labor Standards Act as granting the Labor Department the authority to define and limit the white-collar exemptions based primarily on the duties they perform. Because the Overtime Final Rule would have revoked the exempt status of four million workers based solely on the increase in the salary level and without regard to the work they perform, the judge invalidated the rule.
Today’s ruling in State of Nevada v. U.S. Department of Labor was expected. The main question was how the judge would rule on whether or not the Labor Department has the authority to set any salary-level test. Currently, the salary level is set in regulations at $455/week and has not been changed since 2004.
What does this mean?
The decision is exactly what the current Labor Department had sought this spring – a ruling that the Obama Overtime Final Rule (and the salary level threshold of $913/week) is invalid, but that the Department does have the power to set a salary threshold at some level. The Request for Information (RFI) published in July appears to anticipate this week’s result because many of the questions relate to how to adjust the salary-level test for inflation and what changes to the duties tests, if any, are appropriate.
As we have been advising, nonprofits need to review the RFI and submit comments to the Labor Department by the close of the public comment period on Monday, September 25. For more information, including background on current law and annotations that explain several of the questions presented in the RFI, see the National Council of Nonprofits analysis, Labor Department Reopens White-Collar Salary Exemption for Comments.