- On July 14, 2017
On June 30, 2017, the Trump Administration filed a highly anticipated brief in the case of Nevada v. Department of Labor (DOL), with the United States 5th Circuit Court of Appeals outlining its position on the controversial overtime rule issued by the Obama Administration last year. This rule was challenged in court by 22 states and put on hold by a federal judge in Texas on November 22, 2016, nine days before it was scheduled to go into effect.
In its brief, the Trump Administration did three key things: (1) it announced its intention to stop legally defending the current regulation in the federal appeals court process; (2) it stated that the DOL plans to issue a new regulation to change the threshold salary level that requires employers to pay overtime (the Obama Administration’s rule more than doubled the threshold from $23,660 to $47,476); and it (3) asked the 5th Circuit Court of Appeals to issue a ruling affirming the DOL’s authority to generally set a salary threshold to trigger qualification for overtime via a new regulation, since the November 22 injunction was based on the judge’s finding that the federal government lacks the authority to create a salary test. The brief makes it very clear that the Trump Administration thinks the salary level in the Obama Administration’s rule is indefensibly high and that they would like to lower it. However, they will not undergo a new rulemaking process unless the Appeals Court validates their ability to set and change salary levels relative to overtime requirements.
The Trump Administration’s most recent actions do not affect the current injunction blocking the implementation of the overtime rule, so employers don’t need to make any compliance changes at this time. However, the book isn’t closed on the overtime rule either. Companies need to wait for the court to decide several key issues to get more certainty. Questions that remain unresolved include:
- Will someone else take up the defense of the Obama Administration’s version of the overtime rule?
The Trump Administration does not intend to expend resources on the Obama Administration’s version of the regulation in court, but someone else might. The Texas chapter of the AFL-CIO has filed a motion in the case offering to take up the mantle in support of the pending rule instead, and the 5th Circuit hasn’t decided if they will permit that action. The AFL-CIO filed this motion based on the assumption that the Trump Administration would withdraw completely, so the Department of Labor’s request that the court rule on their statutory authority to regulate overtime salary levels complicates their application.
- Will the 5th Circuit Court of Appeals say that the Department of Labor has the authority to set a salary threshold for overtime?
In his November 22, 2016, ruling that put the overtime rule on hold, Texas Judge Amos L. Mazzant questioned the federal government’s ability to use a salary level as an overtime qualification standard at all, even though the DOL has been using it as a measure since the 1940s. If the 5th Circuit agrees with Judge Mazzant, not only is the Obama Administration’s overtime rule in jeopardy, but so is all previous rulemaking that employers have been relying on for decades.
- If the 5th Circuit says that the DOL can use salary as a determining factor to trigger overtime, then can they prevent the Obama Administration’s regulation from going into effect, at least temporarily?
The Trump Administration’s position that the DOL setting a threshold is legal, but the Obama Administration just set it too high and too quickly is a tricky legal needle to thread. The 5th Circuit might agree that the Trump DOL has the authority to go through the rulemaking process and change the threshold, but what is less clear is if they will keep the current injunction in place while the Trump Administration makes adjustments. It is possible that the Court will give the Trump Administration explicit power to revise the existing rule, but make employers comply with the Obama-era standards in the meantime.
- If the Court gives the Trump Administration the power to change the Obama Administration’s overtime salary threshold, how long would it take for changes to impact employers?
If any overtime rule change affects businesses, it will probably take months, if not years for it to come to fruition. First, the 5th Circuit Court needs to hear oral arguments in this case and then issue a ruling, which could take months. Then, depending on the outcome, either party could attempt to appeal to the Supreme Court, making the legal process stretch out even longer. If at any point the current overtime rule injunction is overturned, then we can expect the states that are parties to the case and the many employer groups that have weighed in on this effort to strongly urge a transition window for companies to make necessary compensation changes. If the injunction stays in place but the Trump Administration is allowed to make changes to the current rule, then the DOL will need to follow to the federal regulatory process of issuing a proposed rule, seeking comments and considering public input before finalizing any changes. This process also takes months to complete, and regulations typically allow for a transition time for affected entities.
The main thing that employers need to know about the overtime rule today is that they do not need to change their current compensation practices. Businesses should continue to watch for any potential changes to the status of federal overtime requirements, but if any changes are to come, they are probably months, if not a year or two away. Kistler Tiffany Benefits continue to monitor developments to keep our clients informed.
By Jessica Waltman, Special Contributor
Jessica Waltman is a health reform strategist, with more than 20 years of experience in health insurance markets and health policy. She is the former Senior Vice President, Government Affairs, for the National Association of Health Underwriters.