A Texas federal court has struck down the 2016 U.S. Department of Labor’s rule that would have greatly increased the number of employees eligible for overtime pay.

This may seem like old news to those who have been following the rule. In November 2016, Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas issued a preliminary junction, preventing the rule from becoming effective (which would otherwise have occurred in December 2016). The rule would have significantly raised the salary level that qualifies an employee for an exemption from overtime eligibility under the Fair Labor Standards Act regulations. Judge Mazzant stated that, pending further review by the court, the rule’s challengers were likely to be able to show that such a significant increase would exceed the agency’s authority.  (We addressed that decision in a prior post on this blog.)

The Department (then under the Obama Administration) appealed that ruling to the Court of Appeals for the Fifth Circuit. Even after the change in administration, the Department asked the court to overturn the injunction, asserting that the Department has the authority to use a salary test for the exemption. New Labor Secretary Acosta reportedly indicated in congressional hearings that while he believes the rule set the salary test too high, the overtime exemption nonetheless needed updating. The Department requested public input on whether the exemption should have a salary level test, and if so what that level or levels should be. The request also addressed certain other topics related to the exemption, such as the extent to which commissions should count toward meeting the test, and whether the level should be automatically updated. The comment period for the Department’s request ends on September 25th.

The news is that last week, Judge Mazzant issued a final summary judgment in the original challenge to the rule. He agreed with his preliminary statements that the Department lacks the authority to establish such a high salary test, as that test then essentially supplants other criteria (such as the types of duties the employee performs) for determining who is exempt from overtime eligibility. The court’s ruling makes the pending appeal to the Fifth Circuit moot.

Questions remain, though, as to what the current administration will do regarding employees’ eligibility for overtime pay. According to estimates, the prior rulemaking would have affected 4.2 million employees, but it faced opposition from many types of employers (and consequently from many on Capitol Hill). The Department now specifies that it will not advocate for such an expansion. Accordingly, if and when Secretary Accosta resurrects the overtime exemption, odds are that number will come down.

A federal court in Texas put a hold on the implementation of the U.S. Department of Labor’s overtime rule.  That rule, which was scheduled to take effect on December 1, 2016, was intended to expand significantly the number of employees entitled to overtime pay under the federal Fair Labor Standards Act.  However, the court postponed that effective date until it can fully consider whether the Department is authorized to promulgate the rule’s increases in the salary-based exemptions. Continue Reading Court Blocks Expansion of Federal Overtime Requirements, at Least Temporarily

Kris Kully, of Mayer Brown’s Financial Services and Regulatory Enforcement group, will speak to credit union mortgage lenders at the 20th Annual Conference of the American Credit Union Mortgage Association in Washington, DC.

On September 19th, she will discuss the next wave of compliance regulations and enforcement priorities.  On September 20th, she will participate in a panel discussion of compliance matters ranging from the Department of Labor’s treatment of mortgage loan originators under the Fair Labor Standards Act, the Consumer Financial Protection Bureau’s regulation of originator compensation, and any other issues the audience requests!

The U.S. Department of Labor (“DOL”) has released its final rule addressing which employees are eligible for overtime pay under the federal Fair Labor Standards Act (“FLSA”).  The FLSA, among other requirements, mandates “time-and-a-half” for employees who work more than 40 hours in a week, unless an exemption applies.  The DOL’s final rule updates the criteria for the exemptions for “white collar” employees, raising the salary levels at which those employees have a right to such overtime pay.  The Obama Administration estimates that 4.2 million additional employees will be eligible for overtime pay, including those who make up to $913 per week ($47,476 per year).

In March 2014, the White House directed the DOL to modernize and simplify the “white collar” exemptions from FLSA’s overtime and minimum wage requirements.  Those white collar exemptions apply to employees who meet the established criteria for executive, administrative, professional, or outside sales employees, among other types of duties.  Generally, the criteria for those exemptions include a duties test (i.e., what do the employees actually do?) and a salary test (i.e., do they earn a salary that is high enough that they arguably do not need FLSA protection?).  The DOL had not updated the duties or salary tests for many of those exemptions in decades.

The “administrative” exemption recently sparked panic in the mortgage lending industry, since the DOL changed its stance and declared that the typical duties of a mortgage loan originator do not qualify those individuals for that exemption.  Although that interpretation was challenged, the Supreme Court decided that the DOL properly issued the interpretation, causing many mortgage lenders to re-examine the duties of their employees to ensure that they meet the criteria for an exemption.  Alternatively, the lender must track the hours worked by those loan originators, determine their “regular rate of pay,” and ensure that those individuals’ salaries and/or commissions result in the receipt of minimum wage, plus time-and-a-half for overtime. Continue Reading DOL Sets Salary Levels for Overtime Requirements