Recently, the U.S. District Court for the Eastern District of Texas issued a ruling that impacts New Jersey municipalities and businesses. In State of Nevada, Et Al. v. United States Department of Labor a group of states and national business groups challenged the Department of Labor’s recently adopted regulations regarding overtime payment for certain salaried employees. More specifically, at issue was whether or not the Department of Labor (“DOL”) was granted the authority under the Fair Labor Standards Act (“FLSA”) to create a rule which uses the amount of salary as a determining factor for when overtime payments must be made to employees.
Prior to being found unlawful, the 2016 regulations provided that employees could not qualify for the exemption to overtime payment requirements found in the FLSA, regardless of their duties, if they earned a salary less than $47,476. The regulations also provided for an annual increase in the salary threshold used in determining overtime payment exceptions. Regulations in effect before 2016 determined exemptions to overtime payments based on a duties test and used a very low salary threshold merely as a means to filter out extreme circumstances where the overtime exemption would not apply.
The court found that the DOL did not have the authority to create a test for overtime payment eligibility that was based primarily on a salary threshold which effectively abandoned a duties test. The court was sure to clarify that while the DOL could use a salary level test when determining overtime pay exemptions, the salary set by the new regulations was far too high, thereby impermissibly supplanting an analysis of an employee’s job duties.
This ruling is beneficial to employers, including municipal employers, as the increase in the salary threshold for overtime payments would have likely meant an increase in municipal payroll obligations. Or in the alternative, taxpayers could have seen a reduction in government services as municipalities would have likely prohibited salaried employees from working longer hours that would have required overtime payments.
Due likely to a mixture of legal concerns over the 2016 regulations and differing political ideologies, the DOL, under the new administration, is attempting to revisit the issue of overtime payments and other regulations under the FLSA. In revisiting these issues the DOL in late July posted a request for information and public comment regarding the current overtime exemptions.
You should review this ruling with your municipal attorney for more information on how the ruling will impact your municipality.
Contact: Frank Marshall, Esq.League Staff Attorney, FMarshall@njslom.org, 609-695-3481 x137.