On Tuesday, November 22, 2016, a federal judge in the Eastern District of Texas, issued a temporary injunction blocking the new federal overtime salary regulations from taking effect on December 1st.
Announced in 2015, the new DOL regulation would have increased the minimum salary threshold for overtime exemptions from $23,660 annually to $47,476 annually. This would mean that for a restaurant to lawfully exempt an employee from overtime, that employee will likely have to earn an annual salary of at least $47,476.
In September of 2016, 21 states and a number of chambers of commerce and trade associations, including the Texas Restaurant Association, sued the U.S. Department of Labor in an effort to stop the new overtime regulations. That new rule was slated to take effect on December 1, 2016, but that effective date has now been blocked.
In the ruling, the judge stated that it was improper for the USDOL to adopt a salary test that categorically excludes a substantial number of workers who meet the exemptions’ duties-related requirements. Although he acknowledged that Congress delegated definitional power to the agency with respect to these exemptions, he concluded that the USDOL overstepped its authority.
While the new overtime rules did not take effect on December 1, and the current salary threshold of $23,660/year ($455/week) remains the law, employers must make sure that an employee meets the duties test in order to be exempt from overtime. Manager exemptions under the federal overtime provisions require that an employee meet both the salary test and the duties test.
A number of measures have been introduced in Congress to prevent or stall the rules changes. One bill would have repealed the proposed rule, while another bill would have staged in the salary increase over three years. Another bill would push the date that the full increase would take effect to 2019, introducing more forgiving gradual increases over a period of time.
As this case and legislation continues to develop, TRA will monitor developments and keep our members informed. For more information, contact Kenneth Besserman, TRA General Counsel (800) 395-2872 or EMAIL.
What's in the rule
That new rule was slated to take effect on December 1, 2016, but that effective date has now been blocked. The rule:
- Guarantees time-and-half pay to any salaried employee earning under $47,476 a year ($913 a week) and who works more than 40 hours in a week. That’s double the current salary threshold of $23,660 ($455 a week).
- Starting Jan. 1, 2020, automatically updates the salary threshold every three years, tying it to the 40th percentile of full-time salaried workers in the lowest-income Census region (currently the South). Based on current wage trends, the DOL projects a salary threshold of more than $51,000 by Jan. 1, 2020.
- Makes no changes in the duties tests used to determine whether a salaried employee above the threshold is considered an executive, administrative or professional employee and thus exempt from overtime pay.
- For the first time, allows certain bonuses and incentive payments to count toward up to 10 percent of the new salary level.
Watch TRA News Now video (October 2016)
Watch TRA News Now video (May 2016)
Department of Labor compliance information. Fact sheets, Q&A, final regulation, and more.
Insights: In-depth discussion of the new rule, Littler Mendelson. (May 31, 2016)