U.S. District Court Strikes Down 2016 Federal Overtime Rule

We finally have a definitive answer to the status of the Overtime Rule that was blocked by an injunction in November, just before it was scheduled to take effect on December 1, 2016.  As for now, there will be no change to the minimum pay for exempt employees at the federal or state level.  As a reminder, the minimum pay rates for employees classified as exempt are (and remain) as follows:
 

• In California for companies with 25 or fewer employees: $800 per week (equal to $41,600 per year)
• In California for companies with 26 or more employees: $840 per week (equal to $43,680 per year)
• Outside of California: $455 per week (equal to $23,660 per year)

 
A few things to note:
 

• If a replacement rule is not introduced, the minimum pay for exempt employees in California will increase each year on January 1st.  I will send out reminders as to what the new minimum pay rate will be as we approach those dates.
• In addition to being paid the minimum salary, employees must meet certain duty requirements to be classified as exempt from overtime.  Contact us today to obtain the list of the applicable California and Federal (for employees outside of CA) exemptions for your review.  Note that in order for an employee to be classified as exempt from overtime, they must meet ALL of the duty requirements of one of the applicable exemptions AND they must earn the minimum pay as listed above.  If either of those do not apply, the employee is eligible for overtime in accordance with state and federal law.

Further Regulatory Developments May Be Forthcoming

The U.S. District Court for the Eastern District of Texas has invalidated the U.S. Department of Labor's (DOL) 2016 overtime rule, which sought to alter the salary level needed for executive, administrative, and professional employees to be deemed exempt from federal minimum wage and overtime pay requirements. While this court ruling is likely to end the principal litigation over the rule, the DOL is still examining whether to adjust the salary level.

How Should Employers Move Forward?

For now, executive, administrative, and professional employees will generally continue to qualify for an exemption from the federal minimum wage and overtime pay requirements if they are compensated on a salary basis at a rate not less than $455 per week ($23,660 annually) and perform certain job duties outlined by the DOL. However, on July 26, 2017, the DOL published a request for information (RFI) seeking new public input on whether to revise the salary level for the executive, administrative, and professional employee exemptions, a move which may be a precursor to a new rule altering those exemptions. If there are any further changes, we will issue an updated news alert.