DOJ Abandons Defense of Increased Salary Level in 2016 Overtime Rule

Government seeks limited appeal of overtime rule decision; Labor Department plans to issue new regulation

By Allen Smith, J.D. Jul 5, 2017
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The Department of Justice (DOJ) has abandoned its defense of the increased salary level in the 2016 overtime rule. The DOJ said in a brief on June 30 to the 5th U.S. Circuit Court of Appeal that the Department of Labor (DOL) intends to revisit the $47,476 per-year ($913 per-week) salary limit set by the rule through new rulemaking.

But the DOJ is appealing the portion of the November 2016 district court decision that said the DOL did not have the authority to set any salary-level threshold for the exemptions. It disagreed with the assertion from the 21 plaintiff states challenging the overtime rule that before 2016, the salary level was "set so low as to be inconsequential." The DOJ noted that an increase in 2004 led to 1.3 million white-collar workers who were exempt under the previous regulations gaining Fair Labor Standards Act (FLSA) protection, "a result that was not inconsequential."

"The DOJ's reply brief reads as if it is trying to thread a needle: confirm that DOL can issue a salary-level test under its authority in Section 13(a)(1) of the FLSA while leaving in place some measure that continues to preclude the 2016 salary level from going into effect," said Alfred Robinson Jr., an attorney with Ogletree Deakins in Washington, D.C., and former administrator of the DOL's Wage and Hour Division.

Long History of Salary-Threshold Test

For more than 75 years, the DOL has used a three-part test to identify workers who are employed in a bona fide executive, administrative or professional capacity and thus are exempt from the minimum wage and overtime pay protections of the FLSA. For that three-part test to be satisfied, a worker must:

  • Be paid on a salary basis.
  • Earn a specified salary.
  • Satisfy a duties test.

[SHRM members-only toolkit: Determining Overtime Eligibility in the United States]

"Although plaintiffs defend the district court's broad reasoning, they offer no basis to call into question a regulatory test that has been in place since the FLSA's inception," the DOJ said.

Secretary of Labor Alexander Acosta said at his confirmation hearing that he wants to raise the salary-level threshold from the 2004 level of $23,660—the amount in place before the blocked 2016 overtime rule—to an amount that reflects inflation: "somewhere around $33,000."

"Labor departments in Republican and Democrat administrations alike have asserted the ability to set a salary level as part of the white-collar exemption tests," said Alexander Passantino, an attorney with Seyfarth Shaw in Washington, D.C., and former acting administrator of the Wage and Hour Division. "Eliminating the salary test and moving toward a more-rigorous duties test is not an outcome many would like to see."

"It is a shrewd move by the DOJ to request that the 5th Circuit confirm the scope of the delegation language in Section 13(a)(1) of the FLSA for the DOL to define and delimit the executive, administrative and professional exemptions from the minimum-wage and overtime requirements," Robinson said.

Rulemaking Should Be 'Welcome News' for Employers

He added that the news that the DOL intends to revisit the salary level threshold through new rulemaking "should be welcome news by employers and employees since the ultimate goal is to set a more reasonable salary-level test. If the 5th Circuit removes the cloud overhanging DOL's authority to establish a salary level, then hopefully a new rulemaking by DOL will eliminate any need for any court to evaluate whether the 2016 salary level is arbitrary or capricious. The concern is that the 2016 salary level does not become effective in the interim."

As Robert Boonin, an attorney with Dykema in Detroit and Ann Arbor, Mich., explained, the DOJ's "approach may be substantively and politically understandable but it is not without risk. The court may take the view that its role is to either uphold or set aside the injunction—an 'all-or-nothing' approach."

"There is a lot of uncertainty in this area right now," noted Jeffrey Brecher, an attorney with Jackson Lewis in Melville, N.Y. "The DOL says in its brief that it will not issue a new proposed rule until the litigation is resolved or at least its authority to set a salary level."

Rep. Mark Takano, D-Calif., said he was "deeply disappointed by the DOL's refusal to defend the threshold set by the Obama administration, which would have protected 13 million middle-class workers." He added, "After a two-year rulemaking process that included consideration of roughly 300,000 public comments, the DOL does not need more time to reconsider the threshold. They need to enforce it as written."

Steven Suflas, an attorney with Ballard Spahr in Denver and Cherry Hill, N.J., said the DOL's stance was no surprise. "As expected, the DOL informed the 5th Circuit that it was going to revisit the 2016 salary-level increases by way of new rulemaking. However, at the same time, the DOL now has defended its historical position that white-collar exemption requires a minimum salary level, in addition to the traditional job duties and salary-basis tests."

 

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