Court Rejects Obama Administration Salary Exemption Rule

As retailers across the country prepare to hire temporary workers for the holiday season, they may be breathing a sigh of relief when it comes to the specter of paying some managers mandatory overtime. A federal district court judge in Texas struck down an Obama administration rule that would have raised the exemption amount that distinguishes hourly employees from salaried workers.

When the increased exemption amount was proposed last fall, trade groups were furious and nearly two dozen states sued the Department of Labor in federal court. They argued that the Obama administration overstepped its bounds in changing the rule, which had not been revisited since 2004, when the salary exemption was set at $23,660. 

As most people may know, hourly employees in California are entitled to time-and-a-half after working more than eight hours per day or more than 40 hours per week. Additionally, a large number of mid-level workers making less than $50,000 were classified as salaried employees and were routinely working more than 40 hours per week without the possibility of earning overtime. So when all of their hours were contemplated, these workers would be earning close to the state minimum wage.

So it is not surprising that the states leading the lawsuit were pleased with the decision. Nevada’s Attorney General noted that the rule, if implemented, would have forced states to pay out millions in past due overtime pay.

Despite the federal court’s decision, if you have questions about your employment classification, an experienced attorney can advise you. 

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