Private-Sector Employees Sue to Enforce New Department of Labor Salary Threshold

Owen H. Laird

If you are a regular reader of this blog, you are undoubtedly aware of the multi-year effort to raise the salary threshold for the purposes of overtime exemption under the Fair Labor Standards Act. If you are not a regular reader, then the previous sentence may not have made much sense.

To refresh: the Fair Labor Standards Act (FLSA) is the federal law that provides for minimum wage, overtime pay, and other wage-and-hour rights. The FLSA requires employers to pay their employees overtime pay – that is, pay at one-and-a-half times their normal rate – for all hours worked above forty (40) per workweek. However, the FLSA creates a number of exemptions to the overtime pay requirement: categories of workers who are not entitled to overtime pay, even if they work more than forty hours in a workweek. For example, employers are not required to provide overtime pay to certain “exempt” employees: people with professional degrees, managers, executives, artists, administrators, and many tech workers, to name a few. However, in order to qualify as exempt, an employee needs to earn as much or more than the “salary threshold,” which is currently $455 per week, or $23,660 per year. In other words, a manager who earns less than $455 a week would be entitled to overtime pay, while a manager who earns more than $455 a week would not, even if their job duties are identical.

Towards the end of the Obama administration, the President and his Department of Labor sought to raise the salary threshold from its current level, which had not been changed in decades. In June 2015, the Department of Labor announced a proposed change, raising the salary threshold. After taking nearly a year to hear comments on the proposed change, the Department of Labor issued the change in May 2016, and raised the threshold to $913 a week, or $47,476 per year. By raising the salary threshold to almost $50,000 a year, the Department of Labor expanded the right to overtime pay to millions new employees. In particular, lower level managers, such as assistant managers in retail locations, who typically make somewhere between $25,000 and $45,000 a year, would now fall under the salary threshold and be entitled to overtime pay.

Several states quickly filed suit, challenging the Department of Labor’s rule change and seeking an injunction halting the implementation of the new salary rule. They argued that the new rule improperly regulated state operations and imposed undue financial burdens on state budgets and governments. In November 2016, a District Court Judge for the Eastern District of Texas granted the injunction, halting the implementation of the new rule days before it was to go into effect. As a result of the injunction, many private employers that had been preparing to change their pay practices to comply with the new rule halted those changes.

Now, employees are bringing suit against private employers, arguing that the Judge’s ruling applied only to states, and that the new rule was still in effect for private employees. While this lawsuit appears to be a longshot, it may be workers’ best hope to see the new rule implemented; however, given the Trump administrations’ stance on workers’ rights, it is unlikely that the current government will push to raise the salary threshold.