obama-era costly overtime rule is over before it begins By: greg trif & seth spiegal, mcelroy, deutsch, mulvaney & carpenter, llp
n August 31, 2017, a federal court in Texas struck down a Rule issued by President Obama’s Department of Labor (“DOL”) that would have significantly increased the number of employees eligible for overtime pay under federal law. The court’s decision is applicable nationwide and is welcome news for contractors and all employers, especially because President Trump’s DOL has suggested that it will not challenge the court’s invalidation of the rule. The original, less expansive rule will continue to apply.
The FLSA, through what is known as the “white-collar exemptions,” “exempts” from its overtime requirements certain employees who hold the status of an executive, administrative, or professional. As a general rule, the exemption is also limited to
On May 18, 2016, the Obama DOL issued a Rule that significantly increased the minimum “salary level” required for an employee to be eligible for the executive, administrative, or professional exemption. Under the Rule,, employees are required to receive overtime pay if they earn less than $913 per week (or $47,476 annually), rather than $455 per week (or $23,660 per year), even if the other requirements for exemption are met. The Rule was scheduled to go into effect on December 1, 2016, and its impact on employers was expected to be significant. The DOL estimated that the Rule would automatically benefit 4.2 million workers who previously were not eligible for overtime pay. Under the proposed Rule, a construction supervisor who performs certain exempt duties such as overseeing a project from start to finish or hiring and firing employees, and who earns an annual salary of $45,000, would be ineligible for the exemption and, therefore, entitled to overtime pay. Upon the Rule’s announcement, contractors were left to decide whether to increase the salaries of certain employees in order to keep them at exempt status, or to provide those employees overtime pay in accordance with the FLSA.
As most employers are aware, the Fair Labor Standards Act (“FLSA”) requires employers to pay employees at least the federal minimum wage of $7.25 per hour; and 1½ times the employee’s “regular rate” of pay for all hours actually worked in excess of 40 hours in a workweek. Some state laws offer employees additional overtime benefits, but New Jersey law is largely consistent with the FLSA on the issue of overtime. While employers in the construction industry may be required to pay specified overtime under an employment contract, such as a collective bargaining agreement (“CBA”), construction employers in general are still subject to the FLSA. For example, even where a CBA governs the employment of trades personnel and field workers, contractor-employers still must abide by the FLSA with respect to both those CBA-covered employees and the employees not covered by the CBA, such as project managers, superintendents, and office staff.
employees who meet three requirements: (1) the employee must be paid a predetermined salary not subject to reduction because of variations in the quality or quantity of work performed; (2) the salary must equal at least the minimum level of $455 per week (or $23,660 per year); and (3) the employee’s duties must primarily feature certain “exempt” functions, such as managing the employer’s enterprise, performing work that requires advanced knowledge, or exercising discretion and independent judgment with respect to matters of significance. Blue-collar laborers are ineligible for these exemptions, but in some instances, depending on the facts relating to their job duties, project managers and superintendents on construction projects may be considered exempt.
Following the DOL’s announcement, 21 states and a group consisting of more than 50 businesses filed federal lawsuits, which ultimately were consolidated into one action, requesting the court to stop the DOL’s enforcement of the Rule. On November 22, 2016, just days prior to the Rule’s effective date, Judge Amos Mazzant of the United States District Court for the Eastern District of Texas issued a preliminary injunction that immediately stopped the Rule’s implementation – and the upward adjustment of the salary level – until the court had an opportunity to consider the merits of the matter in more detail. The DOL, under
Utility & Transportation Contractor | october | 2017 69