Federal Judge Strikes Down Overtime Rule


On Aug. 31, 2017, U.S. District Court Judge Amos Mazzant struck down a U.S. Department of Labor final rule that would have more than doubled the minimum salary threshold for exemptions to the federal overtime requirement and extended overtime to millions of U.S. workers.

Mazzant is the same judge who issued a preliminary injunction against the rule on Nov. 22, 2016. The rule dealing with the “white-collar” exemption was created during the Obama administration. Its original effective date was Dec. 1, 2016. Mazzant’s injunction just a few weeks from the effective date and after the 2016 election kept the rule from being implemented or enforced. His latest ruling vacates the rule all together.

Business groups and 21 states challenged the rule in federal court.

>> Read more from Alabama Retail’s employment law partner Lehr Middlebrooks Vreeland & Thompson on what this ruling means for retailers.


On May 18, 2016, the Obama administration released the final rule. The increase in the minimum salary that it required to be paid before an executive, administrative or professional employee could be exempt from overtime would have more than doubled under the rule from $23,660 annually, or $455 a week, to a threshold of $47,476 annually, or $913 a week. That threshold represents 40 percent of full-time wages in the Southeast, the lowest-wage Census region. The same duties test would have applied as before the rule change.

It is estimated that 64 percent of salaried employees in the retail industry would have been affected by the rule change.

Any exempt employee making an annual salary greater than $23,660 but less than $47,476 would have either had to be reclassified as hourly workers and paid for all hours worked over 40 in a week, be limited to a 40-hour week or receive a pay raise that put them above the $47,476 minimum. Another option would have been to split the job into two part-time positions.

The rule also would have raised the salary level for the highly compensated employee exemption from $100,000 to $134,004 annually.

The threshold would have been adjusted every three years rather than annually. Any automatic increase would have been indexed to salary growth in the lowest income region of the country, which currently is the South. The U.S. Department of Labor projects the 2020 threshold will be $51,168.

For the first time, bonuses and incentive payments would have counted toward up to 10 percent of the new salary level.

Read the rule here

DOL chart comparing current regulations, the proposed rule and the final rule


More on this issue:

More on the Texas federal judge halting the DOL’s overtime rule
Communication from Alabama’s Retail’s employment law partner, Lehr Middlebrooks Vreeland & Thompson on the Nov. 22, 2016 injunction

Federal court blocks new overtime rule
Article by attorneys with Littler Mendelson, the largest global employment and labor law practice. They were involved in the lawsuit that resulted in the preliminary injunction against the rule.

Why Obama’s new overtime rules could be a wet blanket for small businesses
Forbes, Friday, June 3, 2016, article, featuring Alabama Retail board member Terry Shea

Business leaders, politicians react to potential overtime changes
WSFA/WBRC, Wednesday, May 18, 2016, featuring Alabama Retail board member Terry Shea and ARA Communications Manager Melissa Warnke

New overtime pay rules may be complicated for small businesses to implement
WBRC/WTVM, Wednesday, May 18, 2016, featuring Alabama Retail board member Terry Shea