Dive Brief:

• President Trump’s U.S. Labor Dept. (DOL) has dropped its defense of the Obama administration’s Fair Labor Standards Act (FLSA) overtime rule. President Obama’s DOL issued final regulations in late 2016 raising the salary threshold for overtime eligibility from $455 per week (which amounts to $23,660 annually) to $913 per week ($47,476 annually). States and business groups challenged the rule in court, alleging that DOL overstepped its authority, and a federal district court enjoined the rule just days before it was set to take effect. DOL initially defended the lawsuit but, after Trump’s inauguration went silent.
• In blocking the rule, a federal district court judge questioned the legality of any salary threshold, a standard DOL has used as one factor for determining overtime eligibility since the 1940s. In dropping its defense, the agency also asked the 5th Circuit to approve the use of some (presumably lower) threshold, arguing that there was "no basis to call into question a regulatory test that has been in place since the FLSA’s inception."
• The announcement is accompanied by news that DOL will start a new rulemaking process. The agency requested that the 5th Circuit not address the validity of the $47,476 threshold, which "the Department intends to revisit through new rulemaking." DOL began that process June 27 with a public Request for Information (RFI).

Dive Insight:

DOL’s refusal to defend the rule in court, especially in light of the announcement that it will begin a new rulemaking process, seems to indicate the end of Obama’s overtime rule, which would be welcome news for employers.

There are, however, a few outstanding issues to resolve. First, a group of labor organizations had previously asked to intervene in the suit so it could take over defending the rule if DOL did eventually abandon it. The court has not yet ruled on that motion. The judge also could simply decline the plaintiffs’ permanent injunction request, although employment law experts say that’s unlikely. In addition, there’s now at least one lawsuit alleging that last year's injunction did not actually prevent the rule from taking effect.

And if DOL does decide to move forward with a new overtime threshold — with or without the 5th Circuit’s blessing — it’s still not exactly clear what that might look like. Even the many outspoken critics of the original rule acknowledged that the $23,660 threshold was woefully out of date. Many supported an increase but argued that Obama’s rule went too far, too fast. Some have pushed for a threshold in the $35,000-$38,000 range but Acosta has been tight-lipped about his plans.

The RFI, however, may provide some insight into DOL’s future plans. The questions will likely be published in the Federal Register in the next few weeks and stakeholders will have the opportunity to provide the agency with suggestions about future overtime changes. Experts have said DOL may be particularly interested in hearing from employers who made changes before the rule was enjoined.

We’ll continue to watch the story as it evolves.