On November 22, 2016, a federal court in Texas blocked the Department of Labor's overtime rule from going into effect on December 1. The emergency motion was granted at the request of 21 states, ASAE, the U.S. Chamber of Commerce, and other like-minded organizations. The lawsuit argued that DOL had overstepped its authority by issuing an onerous regulation.
From the beginning, ASAE had said that it is not against an increase in the salary threshold for overtime eligibility, but that doubling the threshold and creating a one-size-fits-all rule would not work for employers and could harm employees.
Judge Amos L. Mazzant III, of the U.S. District Court for the Eastern District of Texas, granted a nationwide preliminary injunction against implementation of the rule, holding that the regulation exceeded the authority granted to DOL by Congress. The court’s decision is temporary, and the agency will likely appeal.
“While the injunction is temporary and the legal process will continue, it is highly encouraging that the court agreed with ASAE and others’ contention that the Labor Department exceeded its authority by drastically altering the minimum salary requirements for exemption and by establishing an automatic salary threshold increase every three years,” said ASAE President and CEO John H. Graham IV, FASAE, CAE. “This action is a victory for the thousands of associations and nonprofit groups that voiced their concern with this overreach over the past two years. As we have emphasized throughout this process, we have never been against increasing the salary threshold, but creating a one-size-fits-all measuring stick for overtime eligibility across the country was simply not workable for many employers and, in fact, would have done more harm than good for many affected employees as well.”
The overtime rule was finalized by the DOL in May. As it currently stands, the rule significantly increases the minimum salary level for “white collar” employees to qualify as exempt from overtime pay requirements. Under the new rule, no employee who has a guaranteed salary of less than $47,476 will qualify as exempt under the executive, administrative, or professional exemptions. That’s more than double the current minimum salary level of $23,660 and only slightly lower than the Labor Department’s proposed $50,440. The rule will not affect hourly or other nonexempt workers, who already are eligible for overtime pay.
The final rule includes a mechanism for automatically updating the salary threshold every three years. The next automatic update to the salary threshold will be on January 1, 2020, and the new salary level will be announced 150 days before it takes effect. The minimum salary level is set based on the 40th percentile of wages of full-time salaried employees in the lowest-wage census region (currently, the South).
ASAE is a member of the Partnership for Workplace Opportunity coalition, a diverse group of associations, nonprofits, and businesses advocating for a regulation that is more considerate of all stakeholders and the economic realities facing employers and employees across the country. ASAE also took this issue to Capitol Hill in March as part of American Associations Day, our annual legislative fly-in for association professionals. We held over 250 meetings on Capitol Hill to share our concern about how this rule will affect association professionals around the country.
Before the rule was finalized, ASAE submitted extensive written comments to DOL and met face to face in April with DOL and Office of Management and Budget officials to share our concerns that the new rule would adversely affect many nonprofit organizations and other employers with limited revenues—and could harm many affected employees as well.
ASAE will continue to monitor this issue closely.