Background: New Regulations Adopted
In 2014 the United State Department of Labor issued new regulations governing overtime exemptions. The regulations did not change the main overtime exemptions, but it did raise the salary threshold for them to apply.
The three main exemptions cover executive, professional and administrative employees. An executive employee is one who manages the entire enterprise or a department or subdivision of it, who directs at least two other employees and has hiring and firing authority. An administrative employee main duty must be office or non-manual work directly related to the management of the organization or its primary business operations or that of its customers, and allows for the exercise of discretion and independent judgment.
A professional employee has two subdivisions. The first is a “learned professional” whose primary duty is performing work requiring advanced knowledge and which is primarily intellectual and requires the consistent exercise of discretion and judgment, and must be acquired through a prolonged course of specialized study. The other is a “creative professional,” whose primary duty requires invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.
Income Threshold Under New and Existing Regulations
However, besides the job duties factors which must be met, there are income requirements. For each of these exemptions to apply, the employee must be paid on a salary basis and earn at least $455 per week, or $23,660.
The Department of Labor under President Obama essentially raised the minimum income level for application from $455 per week to $913 per week, or $47,476 annually. In other words, under the old regulations an employer could not claim an employee was exempt unless she made over $23,660. Under the new regulations that exemption cannot claimed by the employer unless the employee is making at least $47,476 per year. The duties test would stay the same.
Attempts to Stop the Regulations
Twenty one states and several business groups sued to stop the regulations. The plaintiffs asked for the United States District Court for the District of Eastern Texas to issue an injunction stopping the enforceability of the regulations.
On November 22, 2016 2016, Judge Amos Mazzant II of the United States Disctrict Court entered a temporary injunction stopping the regulations from being implemented. Judge Mazzant held that the States would likely win on appeal and have the regulations overturned, and so it prohibited the regulations from being enforced anywhere in the country. Judge Mazzant found that the Department of Labor had overreached its statutory authority.
Effect of Decision
Because a localized injunction would create different outcomes for different employees because of where they worked, the Court ordered that the injunction would apply across the whole country. This has effectively prevented the regulations from being applied anywhere, and employees are governed by the prior income levels, $455 a week.
However, despite the geographic scope of the injunction, it is only a temporary injunction before the case goes to trial. This means that the government could still win at trial and have the regulations reinstated. The test for granting a preliminary injunction is that the person seeking the injunction will likely succeed on the merits at trial. This would lead one to think that the injunction is likely to become permanent because the same judge will be hearing the trial. But either way he rules, both sides are likely to be fighting it out in the courts of appeal.
The takeaway then is that the future is uncertain and will be for some time until the matter is decided by trial, and then possibly reversed again in the courts of appeals.
Our New Jersey Employment Law Attorneys
Our New Jersey employment attorneys have considerable experience in representing both employers and employees in overtime disputes. Call us at (973) 890-0004 or email us. We can help.