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Labor Department overtime brief leaves issue in flux

Labor Department overtime brief leaves issue in flux

A brief filed by the U.S. Department of Labor with a federal appeals court over the issue of overtime-exempt employees adds further complexity to an already complicated scenario, experts say.

Late last month, in what some observers described as a surprising move, the U.S. Department of Labor asked the 5th U.S. Circuit Court of Appeals in New Orleans to reaffirm its authority to establish a salary level for overtime-exempt employees.

But the Labor Department also asked that the court not address the validity of any specific salary level set by the 2016 final rule which, the department said, it plans to revisit through new rule-making.

Meanwhile, many employers have already complied with the overtime rule proposed by the department during the Obama administration, under which the threshold for overtime-exempt employees was increased to $914 a week, or $47,476 annually for a full-time employee, from the current $455 a week, or $23,660 annually.

 This leaves firms with the choice of either staying with the dramatically increased threshold or risking raising employees’ ire by, in effect, cutting their salaries.

“This may be the biggest mess of its kind I’ve seen in my nearly 40 years of dealing” with wage and hour law, said John E. Thompson, a partner with Fisher & Philips L.L.P. in Atlanta.

The brief filed by the Labor Department was in response to a Nov. 22, 2016, ruling by Judge Amos L. Mazzant III of the U.S. District Court in Sherman, Texas, who issued a preliminary injunction halting the overtime rule’s planned implementation in response to litigation filed by states and business organizations.

At least some experts had expected the DOL to withdraw the case altogether.

“I think it’s caught most people by surprise,” said Robert A. Boonin, a member of law firm Dykema Gossett P.L.L.C. in Detroit.

“What I found most interesting about it” is that “it essentially agreed with the Obama administration’s position” on the issue of the DOL’s authority to change the salary basis test, said Richard D. Glovsky, a partner with Locke Lord L.L.P. in Boston.

“The strategy has some risks,” said Mr. Boonin. “What the DOL essentially wants the court to do is issue a declaratory judgment” saying some sort of salary level requirement is appropriate, “but still agree not enforce the regulation as promulgated last year.’

“The risk is the court may not be willing to only partially bless or reject the proposed regulation,” he said.

“It’s hard to guess what the 5th Circuit is going to do,” said Mr. Thompson. “First of all, there’s been no ruling on the merits in the lower court. All that’s in front of the 5th Circuit is the lower court’s ruling on a motion for a preliminary injunction.”

“Secondly, it’s not clear to me that the lower court even meant to say that a salary test is impermissible altogether,” based on the opinion’s language, he said.

It is possible, he said, that the 5th Circuit will “affirm what the District Court did for purposes of a preliminary injunction,” and then have the lower court deal with the other issues raised by the litigation. “That’s the narrowest thing the 5th Circuit could do,” Mr. Thompson said.

Meanwhile, the Labor Department has said it plans to seek public comments on the issue. Secretary of Labor Alexander Acosta has said he would be amenable to changing the federal overtime rule, although not to the extent proposed by the Obama administration.

The entire issue, though, may have become academic for many employers who have already changed their threshold salary level in response to the anticipated Obama administration rule, say experts.

Many of these are likely to remain with the change, unless it threatens to put them out of business, Mr. Thompson said.



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