What the Donald Trump Presidency Could Mean for the FLSA Overtime Rule

Allen Smith, J.D. By Allen Smith, J.D. November 14, 2016
What the Donald Trump Presidency Could Mean for the FLSA Overtime Rule

[Editor's note: A federal district court has granted a preliminary injunction blocking the overtime rule from taking effect Dec. 1.]

President-elect Donald Trump can't do much about the Dec. 1 effective date of the new overtime rule, which doubles the exempt salary threshold under the Fair Labor Standards Act (FLSA) to $47,476. But he may be receptive to calling for a small-business exemption and doing away with the triennial automatic increases after he takes office Jan. 20.

"Absent an intervening injunction before Dec. 1, much of the damage will be done by the time Mr. Trump takes office," said Robert Boonin, an attorney with Dykema in Detroit. Twenty-one states and the U.S. Chamber of Commerce have asked a Texas court to bar the overtime rule from taking effect, but the court has yet to rule on that motion.

So, for now, employers need to be prepared to follow the overtime rule as written.

[SHRM members-only toolkit: Calculating Overtime Pay in the United States]

Small-Business Exemption

While Trump said in a brief interview on the campaign trail that he favored a small-business exemption, Boonin said the overtime rule "has not been an issue in the campaign and so it is hard to predict how high of a priority this rule will be to the new administration." He added that Trump "may not see the regulations as being untenable, particularly if small businesses and perhaps also nonprofits and schools could get some relief."

FLSA Overtime Rule Compliance

For more overtime compliance news, tips and tools, check out the SHRM resources provided below:

· FLSA Overtime Rule Resources Guide
· Compliance Checklist· Infographic

Ryan Glasgow, an attorney with Hunton & Williams in Richmond, Va., noted that the FLSA already has a small-business exemption because enterprise coverage applies only to businesses with $500,000 or more in annual revenue. However, the FLSA's individual coverage still applies to any employee whose work relates to interstate commerce.

"One way that Trump and the Republican Congress could create a more robust small-business exemption is to do away with individual coverage," he said. "Not only would this help small businesses, it would also help the thousands of nonprofit entities that are impacted by the new rule."

Other options would be a lower salary level for exempt employees of small businesses or implementation of the rule over a longer period, Boonin noted.

Triennial Updating

Rep. Kurt Schrader, D-Ore., has introduced legislation that would phase in the overtime rule over four years for all employers and eliminate the automatic triennial increase of the exempt salary threshold. Sen. Lamar Alexander, R-Tenn., has introduced companion legislation.

In addition, a proposal to delay the effective date passed the House of Representatives but has not yet passed the Senate and has not been signed into law by the president. President Barack Obama likely would veto the proposal if it reached his desk.

"There should be little question that a President Trump would be more receptive to a congressional proposal to delay or phase in the new salary level," said Alfred Robinson Jr., an attorney with Ogletree Deakins in Washington, D.C., and former acting administrator of the Wage and Hour Division. "This final rule, which more than doubles the salary-level test, continues to create challenges for employers that would welcome relief or a reprieve."

"The triennial updating is likely to fail in the pending litigation, and that provision does not present a threat to employers until late 2019 anyway," said Paul DeCamp, an attorney with Jackson Lewis in Reston, Va., and former administrator of the Wage and Hour Division.

Another possibility: The Trump administration could direct the Department of Labor to withdraw the rule, which would require notice-and-comment rulemaking, noted Jeffrey Brecher, an attorney with Jackson Lewis in the firm's Long Island, N.Y., office. Or the administration might go through notice-and-comment rulemaking to do away with the automatic increase, if congressional and legal challenges of it fail.

Full Compliance

Although Trump and Congress could act swiftly together to limit the rule's impact, "The notice-and comment process would take many months, if not years, so employers shouldn't expect immediate relief from the rule. They should instead continue their plans for complying with the new rule," Glasgow said.

Donald Trump
U.S. Presidential Election Coverage

For more information about Donald Trump's workplace policies and how they effect HR professionals, check out the SHRM resources provided below:

· SHRM's post-election coverage
· Trump's work policies · First 100 days

"While the Administrative Procedure Act does allow for the issuance of an emergency regulation for 'good cause' where the notice-and-comment process would be 'impracticable, unnecessary or contrary to the public interest,' it is not clear at this juncture if this would be a viable option," Robinson noted.

"Barring an injunction in the lawsuits in Texas or a successful intervention by Congress in the meantime, it seems unlikely that a change to the overtime rule can happen before the rule has been in effect for at least a few months," DeCamp said. "Employers should continue to plan to be ready to be fully compliant as of Dec. 1."

After all, Trump's rollback of the rule isn't a given. Jim Swartz, an attorney with Polsinelli in Atlanta, said, "Given his relatively tepid reaction to the rule when questioned on the campaign trail, it is hard to imagine that Trump is willing to sacrifice political capital to roll back a rule that may well help many of his supporters."

However, Brian Turoff, an attorney with Venable in New York City, said the overtime rule might "end up hurting the employees it's trying to help."

True, employers may raise salaries of those close to the exempt salary threshold, he noted, but compliance options also include:

  • Not permitting overtime work among those reclassified as nonexempt.
  • Conducting layoffs to make up for increases in payroll costs.
  • Cutting benefits.
  • Splitting shifts.

The extent to which these steps are viable depends on what industry a business is in, he noted. For example, splitting shifts may work at restaurants but not in an office.

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