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ALERT: Federal Judge Blocks New Overtime Rule

Staff Contact: Frank Kerbein
November 23, 2016

As you know, in May of this year, the Wage and Hours Division of the U.S. Department of Labor released a final rule that raised the minimum salary level to be considered an exempt employee (i.e., exempt from overtime) from $455 per week ($23,660 per year) to $913 per week ($47,476 per year) effective the pay period that includes December 1, 2016.

Yesterday, however, U.S. District Judge Amos Mazzant, in Sherman, Texas, agreed with 21 states and a coalition of business groups that the rule is unlawful and granted their motion for a preliminary nationwide injunction.

Mazzant, who was appointed by President Barack Obama, ruled that the federal law governing overtime does not allow the Labor Department to decide which workers are eligible based on salary levels alone.  The Fair Labor Standards Act says that employees can be exempt from overtime if they perform executive, administrative or professional duties, but the rule “creates essentially a de facto salary-only test,” Mazzant wrote in the 20-page ruling.

The Labor Department can appeal to the New Orleans-based 5th U.S. Circuit Court of Appeals, but that court has opposed Obama administration rule making before, blocking Obama’s executive actions on immigration in 2015. The Labor Department could drop the appeal after Republican President-elect Donald Trump takes office in January.

In the past, Trump has said that the overtime rule was an example of the type of burdensome business regulations he would seek to roll back as president, perhaps by exempting small businesses or delaying implementation. Congress has proposed legislation that would roll back and/or delay the new rule - legislation that could be supported by President-elect Trump.

Until a final resolution is reached, employers will no longer have to comply with the $913 minimum salary level for exemption on December 1, 2016. Please contact me with any questions you may have regarding this development. I can be reached at (800) 332-2117 or at frank.kerbein@bcnys.org.

Important:  New York State has its own minimum salary levels for the Executive and Administrative exemption – currently $675 per week ($35,100 annually).

In a little notice provision of proposed rules in the October 19th State Register, the NYS Department of Labor has proposed changing the NY salary level for Executive and Administrative exemptions. Apparently these salary levels are pegged at 75 times the State’s minimum wage and are to be proportionally increased as the State implements its new minimum wage.  You can find the proposed changes here (see page 27). In summary, the proposed minimum salary levels for exempt employees are:

New York City Large Employers (11 or more employees):
$825.00 per week on and after December 31, 2016
$975.00 per week on and after December 31, 2017
$1,125.00 per week on and after December 31, 2018

New York City Small Employers (10 or fewer employees):
$787.50 per week on and after December 31, 2016
$900.00 per week on and after December 31, 2017
$1,012.50 per week on and after December 31, 2018
$1,125.00 per week on and after December 31, 2019

Remainder of Downstate (Nassau, Suffolk and Westchester counties):
$750.00 per week on and after December 31, 2016
$825.00 per week on and after December 31, 2017
$900.00 per week on and after December 31, 2018
$975.00 per week on and after December 31, 2019
$1,050.00 per week on and after December 31, 2020
$1,125.00 per week on and after December 31, 2021

Remainder of the State:
$727.50 per week on and after December 31, 2016
$780.00 per week on and after December 31, 2017
$832.00 per week on and after December 31, 2018
$885.00 per week on and after December 31, 2019
$937.50 per week on and after December 31, 2020

Take note that there are other proportional increases related to allowances related to tips, meals, lodging, etc.

The Business Council will be submitting comments regarding the proposed rules. and we welcome your input. Feel free to contact me at (800) 332-2117 or at frank.kerbein@bcnys.org. The comment period will end December 2, 2016. If you plan on submitting your own comments, instructions for submitting comments can be found here.