Employers across the country can breathe a collective sigh of relief. On August 31, 2017, the US District Court for the Eastern District of Texas issued a final ruling that officially invalidates (or kills) the DOL Overtime rule. In short, the Court found that the DOL had “overstepped its bounds” by setting such a high salary level for the executive, administrative, and professional exemptions.
What does this mean for employers?
In short, this ruling means that the exempt salary threshold for executive, administrative, and professional employees remains at $23,600 per year (or at the established state level, if the employer is in a state that has implemented a higher exempt salary threshold).
One thing of note, the Court clarified that its ruling did not mean that the DOL could not set any minimum salary level as one of the tests for determining whether an individual is exempt from overtime under these exemptions. With this in mind, there remains a possibility that the DOL may attempt to increase the minimum salary level in the future. However, if that increase were to occur, it would most likely be a much less drastic increase (and not a doubling of the existing salary level).
At the present time, the DOL has not announced any intention to seek an increase of the salary level. That being said, employers should prepare for an eventual increase to the exempt salary threshold, even though it isn’t clear what the final number will be.
In its reply brief, filed June 30, 2017, the DOL has (somewhat) clarified its position with respect to the DOL Overtime Rule.
In this brief, the DOL has asked that the Court affirm the DOL’s continued ability to include a salary level test as a part of the “white collar exemption” FLSA test. The DOL has also requested that the temporary injunction against the DOL Overtime Rule be lifted.
While this latter request might cause employers alarm, the DOL also specifically asked that the Court not address the validity of the $913 per week salary level set forth in the current DOL Overtime Rule because the DOL intends to revisit the salary threshold through new rulemaking.
What Does This Mean for Employers?
Bottom line, the DOL Overtime remains “on hold” for the foreseeable future. It appears that the DOL may attempt to draft a revised rule, with a lower salary threshold. Employers must continue to “wait and see.”
For the time being, the minimum salary threshold for the white-collar exemptions remains at $455 a week. The salary threshold for the highly compensated employee exemption remains at $100,000 per year.
In January of 2016, the Department of Labor issued informal guidance materials (Administrator’s Interpretation No. 2016-1) relating to joint employment. In these materials, the DOL advocated for a broad standard for finding a joint employment relationship.
While the franchisor/franchisee relationship was not directly mentioned in these materials, the accompanying question and answer sheet indicated that a franchisor and its franchisee could be deemed the joint employer of a franchisee’s workers depending on the situation. This guidance was concerning to franchisors because it meant that, if found to be a joint employer of its franchisee’s employees, the franchisor could be liable for any minimum wage or overtime violations by its franchisees.
As of June 7, 2017, franchisors can breathe a collective sigh of relief. On June 7, 2017, U.S. Secretary of Labor Alexander Acosta announced that the Department of Labor (DOL) is withdrawing Administrator’s Interpretation No. 2016-1. The DOL’s press release announcing the change is available here.
While the DOL has withdrawn Administrator’s Interpretation No. 2016-1, the NLRB’s attempts to expand the joint-employment standard may continue. In 2015, the NLRB (in Browning-Ferris Industries of California, Inc.) restated the standard for finding joint employment by holding that indirect control or the reserved right to control, even if unexercised, may be sufficient to find a joint-employer relationship. This case is currently on appeal to the D.C. Circuit Court of Appeals and it remains to be seen how the NLRB will view the joint employer issue in the future.
Since the injunction against the Department of Labor’s Overtime Rule was issued on November 23, 2016 (see FLSA Overtime Rule Blocked by Texas Federal Court), employers have been wondering when (if ever) the DOL Overtime Rule will go into effect.
Until recently, the Department of Labor has kept (relatively) silent about the fate of the Overtime Rule. However, last week (June 7, 2017) Secretary of Labor Acosta said that he will soon formally request the public’s input on new overtime regulations. Many experts believe this comment indicates that the DOL is considering dropping its defense of the litigation challenging the injunction against original rule.
When asked about the DOL’s plans concerning the Overtime Rule, Acosta said that the DOL plans to look at the overtime rule “as a general matter.”
I think that any rule that has a dollar amount that isn’t updated for as long as this … is a problem because life gets a lot more expensive,” he said. “But I also think that the way it was done created a shock to the system and the department is in the process of drafting a request for information that I think will be filed in … probably the next 2 to 3 weeks asking for public information and public comment on the overtime rule.
While these comments do not reveal the DOL’s ultimate plans for the Overtime Rule, they do indicate that the fate of the Rule will soon be revealed. Until such time, we recommend that employers who did not already take action to comply with the DOL Overtime Rule continue to delay any action until the status of the Overtime Rule is known. It is also recommended that employers take the opportunity to review their exempt positions against the duties tests.
Since the injunction against the Department of Labor’s Overtime Rule was issued on November 23, 2016 (see FLSA Overtime Rule Blocked by Texas Federal Court), employers across the United States have been anxiously awaiting one thing – a final decision regarding this rule.
While the final fate of the Rule (still) has not been decided, there may be a light at the end of the tunnel.
The DOL recently requested (another) extension to file its reply brief to its appeal of the preliminary injunction. This extension was granted and the DOL now has until June 30th to file a reply brief.
What this means for employers
Unfortunately, employers are still in the “wait and see” mode when it comes to the DOL rule.
To the extent that a company did not already take action to comply with the DOL Overtime Rule, we recommend that employers delay any action until a ruling has been issued on the appeal. It is also recommended that employers take the opportunity to review their exempt positions against the duties tests.
In a recent decision (Lashawna C. v. Perez (2017 WL 664453)), the EEOC reminds employers that sometimes only one insensitive comment is all it takes to create a hostile work environment and religious harassment.
The case arose from a single comment a supervisor (within the Department of Labor) made to a (Jewish) subordinate in an email exchange regarding the subordinate’s work hours and work schedule.
The subordinate had commented that government employees generally work shorter hours than private sector employees, and lately she was “working like a civilian.”
In response, the supervisor said:
Wow … then I must be a damn fool … cause I’ve been working like a Hebrew slave the last 9 years and don’t have enough time to take off … at least somebody got it right.
In explaining his comment to the EEOC, the supervisor said that he used the term “Hebrew slave” in his email to her because this was a “common term that’s used to reflect individuals who work with little means to produce great things.”
While the DOL’s position was that this single comment was not severe enough to constitute harassment because he applied the term to himself, instead of to the subordinate, the EEOC disagreed – finding that the supervisor engaged in religious harassment and awarded the subordinate $20,000.
Take Home For Employers
While this holding is inconsistent not only with court rulings, but also the language of the relevant statute, which only bans harassment when it is sufficiently pervasive as to affect “terms” or “conditions of employment,” it provides an important “teachable moment” for employers to use when training their managerial staff about communicating with subordinates. Specifically, managers and supervisors should be trained on what is appropriate and not appropriate to say to subordinates.
Under the Inflation Adjustment Act, the DOL is required to adjust its civil monetary penalty levels to account for inflation no later than January 15 of each year. In accordance with this obligation, the DOL recently issued a final rule that increases penalties assessed or enforced in its regulations.
These increased penalties apply to regulations enforced by the following federal agencies:
- Office of Workers’ Compensation Programs;
- Wage and Hour Division;
- Occupational Safety and Health Administration (OSHA);
- Employee Benefits Security Administration; and
- Mine Safety and Health Administration.
Most significant to most employers are those penalties under the laws enforced by the Wage and Hour Division, which include:
- Fair Labor Standards Act;
- Family and Medical Leave Act;
- Migrant and Seasonal Agricultural Worker Protection Act;
- The Immigration and Nationality Act (INA) (regarding the H-2A, D-1 and H-1B visa programs); and
- Employee Polygraph Protection Act (EPPA).
On December 1, 2016, the US Department of Labor filed a Notice of Appeal of the Court’s November 22, 2016 ruling on the FLSA Overtime Rule (wherein the Court issued a preliminary injunction that prevented the FLSA Overtime Rule from taking effect).
While the appeal of the court’s ruling was widely expected, many employers are left wondering how this appeal affects them …
At the present time, the filing of a notice of appeal has no effect on the preliminary injunction. In other words, the preliminary injunction remains in place and the FLSA Overtime Rule has not gone into effect.
What should employers do?
As stated on our earlier article (FLSA Overtime Rule Blocked by Texas Federal Court), the future of the FLSA Overtime Rule remains uncertain. It is our recommendation that you continue preparing for the FLSA Overtime Rule (i.e. continue your analysis and decide your intended course of action), but refrain from making any changes until the fate of the overtime rule is determined.
Good news for employers – the effective date for the US Department of Labor’s FLSA Overtime Rule has been temporarily postponed!
As most were likely aware, in September of 2016, several states filed lawsuits seeking to enjoin the FLSA Overtime Rule (i.e. prevent the Rule from going into effect). Earlier this month, the U.S. District Court in Eastern Texas heard oral argument on the states’ “Emergency Motion for Preliminary Injunction to stop nationwide implementation of the [FLSA Overtime Rule]”.
The Court issued its ruling on this motion on November 22, 2016 granting the preliminary injunction on a nationwide basis pending the Court’s final determination of the matter. A date has not been set for future hearings.
In light of these changed circumstances (and because the rule may ultimately go into effect), our recommendation is that you continue preparing for the FLSA Overtime Rule (i.e. continue your analysis and decide your intended course of action), but refrain from making any changes until the Court issues its final ruling on the issue.
On October 28, 2016, the U.S. Department of Labor (DOL) announced that it has launched the beta version of worker.gov, the DOL’s new website. This new website is intended to give employees “access to information about their rights that responds directly to their challenges” while removing the guesswork for the employee as to which law might apply in the employee’s situation.
According to the DOL, the new website is designed to provide workers access to critical information about their rights . . . in a way that makes sense for them.” Rather than asking employees to identify the violation, the new website asked employees to “answer a few simple questions about their lives and jobs” and then will “guide them to the information they need” without workers needing “to know the name of a single statute or government agency.”
At the present time, the DOL is beta-testing the new website, but even this beta-test sends an important message to employers. The DOL is using technology to enable employees to be more proactive in identifying potential legal violations in their workplace. Employers need to be aware of this new tool and be prepared for a potential increase in claims once employees start using this tool.