Back in May 2016, the DOL issued the Final Rule updating and modernizing overtime regulations. The Final Rule raised the minimum salary level for exempt employees from $455 per week to $913 per week. In response, a number of States and private businesses sued to enjoin the application of the Final Rule and obtained an injunction blocking the Final Rule from going into effect. Yesterday, the United States District Court for the Eastern District of Texas granted the business plaintiff’s motion for summary judgment and essentially killed off the Final Rule.
As we all know (or know by now) to be exempt from minimum wage and overtime, an employee must: (i) perform bona fide executive, administrative, or professional capacity duties; and (ii) be paid a salary of at least $455 per week. The Court found that the Final Rule essentially ignored the duties test and focused only on the salary component of the exemption, with the result that salary, rather than an employee’s duties, became determinative of whether a bona fide executive, administrative, or professional capacity employee should be exempt from overtime. Because this ignored Congress’ intent when enacting the exemption, the Court found that the DOL exceeded its authority when issuing the Final Rule.
There is no easy answer to the question of whether employers should reclassify employees as exempt who were switched to non-exempt status when the Final Rule was issued in May 2016. The decision depends upon the economics of the positions, how much overtime is worked and necessary to operate your business, how switching your employees’ status will impact their income, and how reclassification will impact company morale.