News & Press

5 September, 2017

Federal Court Strikes Down Obama-Era Federal Overtime Rule

In case you missed late last week, on Thursday, August 31, 2017, a Texas federal judge (Amos Mazzant III) struck down Obama-era federal overtime rule changes that would have more than doubled overtime pay eligibility for non-exempt employees from $23,660 to $47,476.  An estimated 4.2 million middle-class workers would have benefited. The same court, last November, blocked the overtime rule from taking effect but had not declared it invalid.

The Fair Labor Standards Act (FLSA) overtime rule determines whether employees are eligible for or exempt from overtime pay. Under the FLSA, nonexempt employees must be paid time and a half for any hours considered overtime. Exempt employees, because of their pay rate and type of work (executive, administrative, professional), are not eligible for overtime pay. Mazzant granted summary judgement primarily because the Department of Labor (DOL) gave too much weight to salary and not enough consideration for job description, in determining overtime eligibility. 

It is still possible that the DOL may raise the overtime threshold. Labor Secretary Alexander Acosta has said he recognizes the need for an increase, as do business groups seeking a lower threshold and slower escalation rate. To this end, labor attorneys are advising employers to prepare for an eventual exempt salary threshold increase, even though the exact level hasn’t been established.

What This Means for Hospitality Employers 

Employers don't have to make any changes based on the new ruling, at this time. The existing overtime regulations that were last updated in 2004 (including the $23,660 exempt salary threshold) apply for now. 

Hospitality employers still need to think about how they want to classify and pay employees going forward in light of Mazzant’s ruling and possible future changes to overtime thresholds and exemption criteria.

Meanwhile, employers and trade associations can submit comments to the DOL, as the department's request for information offers an additional opportunity for public comment about the salary threshold. The DOL can still appeal the ruling, however, at this stage an appeal is unlikely.

We want you to know that we are actively monitoring developments. If you want to learn more about how this new guidance impacts your organization, please email  info@hospitalitybenefits.com or call 703-810-3700.

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