Department of Labor’s Overtime Rule Invalidated By Federal Court

Overtime eligibility will not be expanded.

After a series of legal challenges and delays, a final rule passed by the Department of Labor (DOL) in 2016 to expand overtime eligibility for employees has been invalidated. For now, this means that the old overtime rules still apply.

The Fair Labor Standards Act (FLSA) carves out a limited number of exceptions to the general rule that employers must pay overtime. To qualify under some of these exemptions—and therefore not be owed overtime—the employee must make a minimum salary. For many years, the salary threshold was $455 per week (or $23,600 per year). The DOL passed a final rule in 2016 to increase the salary threshold to $913 per month (or $47,476 per year). This would have made millions of workers eligible for overtime pay.

However, several states and business groups challenged the final rule in court. After delaying the rule from taking effect for several months, a Texas judge struck down the final rule in August of 2017, holding that the DOL didn’t have the legal authority to raise the salary threshold so high. The judge found that Congress intended for the salary threshold to be low, in order to weed out only those employees who clearly should be entitled to overtime. For everyone else, their overtime eligibility should be determined by their job duties. (To learn more about the job duties test, see our article on the white-collar exemptions.)

For now, the salary threshold remains at $455 per week. The Department of Labor is expected to consider a new rule that would raise the salary threshold but not as high as $913 per week. This process could take several months. Updates will be posted as they become available.

Effective Date: August 31, 2017