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Update: Department of Labor Renews Overtime Rule Review

by Jennifer Gray

Updated (September 1) From our partner, the National Council of Nonprofits

A federal judge in Texas ruled yesterday (in State of Nevada v. U.S. Department of Labor), as expected, that the Overtime Final Rule is invalid because the U.S. Department of Labor exceeded its authority in setting a high salary-level test that denied exempt status to executive, administrative, and professional employees without regard to their job duties.

  • The judge interpreted the Fair Labor Standards Act as granting the Labor Department the authority to define and delimit the white-collar exemptions based primarily on the duties they perform.
  • Because the Overtime Final Rule would have revoked the exempt status of four million workers based solely on the increase in the salary level and without regard to the work they perform, the judge invalidated the rule.
  • This is the same judge who temporarily enjoined the Obama Administration’s Overtime Final Rule late last year.
  • The main question was how the judge would rule on whether or not the Labor Department has the authority to set any salary-level test. Currently, the salary level is set in regulations at $455/week and has not been changed since 2004. The judge (in footnote 5) cites precedent that “the Department has the authority to implement a salary-level test.” In footnote 6 he gives the clear indication that he would approve an adjustment of the existing salary level based on inflation because it would continue to operate as a floor rather than as an alternative test for exempt status.

What does this mean going forward?

The decision today is exactly what the current Labor Department had sought in amended court pleadings this spring – a ruling that the Obama Overtime Final Rule (and the salary level threshold of $913/week) is invalid, but that the Department does have the power to set a salary threshold as some level. The Request for Information (RFI) published in July (see more information below) appears to anticipate the ruling because many of the questions relate to how to adjust the salary-level test for inflation and what changes to the duties tests, if any, are appropriate.

Nonprofits need to review the RFI and submit comments to the Labor Department by the close of the public comment period on Monday, September 25 (see below). For more information, including background on current law and annotations that explain several of the questions presented in the RFI, see the National Council of Nonprofits analysis, Labor Department Reopens White-Collar Salary Exemption for Comments.

Join a Phone Call with the U.S. Small Business Administration

If you have questions, join a call on the overtime RFI specifically designed to address questions of charitable nonprofits. The call, which will be hosted by the Advocacy Office of the U.S. Small Business Administration, will be held on Tuesday, September 12 at 3:00 pm Eastern. Register here to participate.

New Request for Information

The U.S. Department of Labor has published a Request for Information (RFI) in the Federal Register seeking comments from the public about how the white-collar salary regulations under the Fair Labor Standards Act should be updated.

  • The Obama Administration had sought to revise the same regulations, but that effort was blocked by a federal court in late 2016. Under current law, employees working in a “bona fide executive, administrative, or professional capacity” are not eligible for overtime pay.
  • The questions posed by the Labor Department in the new RFI give the public the opportunity to weigh in on whether and how those tests should be changed in future DOL rulemaking.
  • Unless a significant number of individual nonprofits submit comments to the Department of Labor by September 25, 2017, the impact of future regulations on the nonprofits sector will be defined by academics, for-profit management groups, worker rights organizations, bureaucrats, and others based on assumptions and data from other sectors.

Conduct a Mission-based Analysis

The National Council of Nonprofits encourages all nonprofits to conduct a mission-based analysis of the law and questions presented in the RFI.

  • That means answering questions about how an increase in the minimum salary levels would affect operations, resources, and staffing, as well as what impact changed regulations would have on the people relying on the services and the mission of the nonprofit.

For more information, including background on current law and annotations that explain several of the questions presented in the RFI, see the National Council of Nonprofits analysis, Labor Department Reopens White-Collar Salary Exemption for Comments. The deadline for submitting comments to the Department of Labor is September 25, 2017.

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