A federal judge on Thursday permanently struck down the overtime rule proposed by the Obama administration in May 2016. The judge stated that the Department of Labor set an excessively high threshold to determine which employees are exempt from overtime. The Judge did state, however, that the Department of Labor had the authority to set a higher threshold.
The rule would originally have raised the threshold at which executive, administrative and professional employees are exempt from overtime to $47,476 from $23,660. The judge said that the Labor Department had the authority to establish a threshold, but it set the salary threshold at such a high level that it made assessment of the workers duties irrelevant in determining whether the worker was eligible for overtime.
Put another way, judge believes that too many workers would’ve been eligible for overtime even if they performed executive, administrative or executive functions.
WHAT HAPPENS NEXT?
The Trump administration is unlikely to appeal the decision. They have stated, however, that they will raise the threshold to some level between the two figures previously quoted.
What do you do next? You should still proceed to analyze your employees’ duties to see if they fall under any of the exemptions. If you are unsure we encourage you to seek an opinion from an expert as to whether an employee qualifies.
Second, when the Trump Administration raises the threshold, consider whether you should raise employee salaries to the new threshold or convert salaried employees to hourly workers. Salaried employees may consider it a demotion to be changed to hourly so you need to be careful about how you handle this.
The rule would have affected for-profit and not for profit organizations. As always, if we can help please call us.
