The DOL’s request for public comments concerning the FLSA’s overtime exemptions regulations suggests there could be significant changes ahead on those regulations.
On July 25, the US Department of Labor (DOL) posted a “request for information” on potential revisions to the Fair Labor Standard Act’s (FLSA’s) overtime exemptions. The DOL indicated that this request would precede and inform a subsequent formal request for public comment on proposed rulemaking. Specifically, the request seeks feedback on a variety of issues related to not only the specific 2016 revisions to the FLSA overtime exemption regulations but also to potentially more expansive changes to the regulations. For example, the DOL is seeking comments on how the appropriate salary level for the overtime exemptions should be determined, and whether salary levels should be different for different exemptions or based on various factors such as size of employer or region of employment. The DOL is also seeking comments on whether separate salary or duties tests are needed or if one or the other could be sufficient to determine exemption status. The DOL also seeks information regarding the extent to which employers actually increased salaries of employees or reclassified employees in response to the 2016 regulations, presumably so that the DOL can evaluate the financial impact the regulation changes have already had on businesses. These questions indicate that the DOL continues to reconsider much of the DOL’s agenda under former US President Barack Obama, especially considering its recent withdrawal of the prior administration’s administrative interpretations concerning joint employment and contractor misclassification.
The request for information will be formally published on July 26, 2017, and the deadline to submit comments will be 60 days from that date (September 24, 2017).
Prior to 2016, the FLSA overtime regulations were last updated in 2004. In March 2014, former President Obama directed the DOL to “modernize and streamline” the DOL’s white collar exemption regulations. Pursuant to President Obama’s directive and after a notice-and-comment period, the DOL issued its Final Rule on May 18, 2016, which
The 2016 Final Rule, however, has not gone into effect due to an order from the US District Court for the Eastern District of Texas that enjoined the implementation of the rule. The DOL appealed that injunction order and it is currently being reviewed by the US Court of Appeals for the Fifth Circuit. The pending appeal of that order concerns the reasoning of the district court that called into question the DOL’s authority to utilize a salary level test in determining the exempt status of employees under the FLSA. The Department of Justice, on behalf of the DOL, is arguing that 29 U.S.C. § 213(a)(1) provides the Secretary of Labor authority to establish a salary level test. However, the DOL has decided not to advocate for the specific salary level set in the 2016 Final Rule at this time and has stated that, instead, it intends to undertake further investigation and rulemaking regarding the salary level and potentially other changes to the FLSA overtime regulations. The shift in the DOL’s position on the 2016 Final Rule coincides with President Donald Trump’s executive order issued on February 24, 2017, which directed all federal agencies to identify regulations for repeal, replacement, or modification that, among other factors, eliminate jobs or inhibit job creation.
In its request, the DOL notes that it is “aware of stakeholder concerns that the standard salary level set in the 2016 Final Rule was too high,” and that “stakeholders have expressed the concern that the new salary level inappropriately excludes from exemption too many workers who pass the standard duties test.” Based on these and other concerns regarding the 2016 Final Rule, the DOL seeks comments on the following questions:
The request for information was posted on July 25, 2017 and will be formally published in the Federal Register on July 26, 2017. Comments will be due within 60 days after the official publication of the request, which will be September 24, 2017.
The DOL’s request signals that significant changes to the FLSA overtime regulations may be coming. Specifically, the questions posed by the DOL indicate that new regulations may go well beyond lowering the salary requirement mandated by the 2016 Final Rule. It appears that the DOL may also introduce broader changes to the FLSA overtime regulations. For example, the DOL’s question regarding whether a salary requirement is necessary at all suggests that the DOL is exploring a duties-only test for exemption status. Likewise, the DOL’s questions suggest that if a salary requirement remains, the salary levels may vary by exemption and/or may be set based on factors such as employer size and/or cost-of-living statistics. Another critical question, particularly in the retail and quick-serve food industries, is the DOL’s inquiry into whether the 2016 regulation changes would have eliminated the exemption for jobs that historically have been exempt. This suggests that the DOL may be reluctant to take any action that would dramatically change the longstanding playing field for employers in particular industries. It is difficult to predict how the DOL under the Trump administration will revise the current FLSA overtime exemptions, particularly without us seeing the comments that will be received, but the DOL apparently is considering the full range of options.
Employers should continue closely tracking these developments and preparing for the changes that are likely to follow the DOL’s request for information. But employers must also remain vigilant in their compliance efforts. In addition to the DOL’s actions, the plaintiffs’ bar remains as active as ever in pursuing FLSA violations.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Sari M. Alamuddin
John S. Battenfeld
Anne Marie Estevez
Brendan T. Killeen
Carrie A. Gonell
Michael J. Puma
Christopher K. Ramsey
Melinda S. Riechert
Lincoln O. Bisbee