It’s no secret that President Obama’s use of executive orders to transform workplace laws was unprecedented. But perhaps even more unprecedented is how quickly those efforts have been derailed by the Trump administration. From NLRB appointments, to safety standards, to persuader-disclosure and joint-employment rules—to name a few—the White House has been systematically reversing workplace rules that President Obama implemented through executive orders, rather than through Congress.
Now, add two more hits to the list.
Obama-Era Overtime Rule Takes Final Hit.
The first hit was the final blow to President Obama’s controversial overtime rule, which sought to expand the number of workers eligible for overtime compensation. In November 2016, a Texas federal district court preliminarily enjoined the rule just before it was due to take effect. The Department of Justice (DOJ) subsequently appealed that decision to the Fifth Circuit Court of Appeals.
On August 31, 2017, with the Fifth Circuit appeal pending, the district court made its final determination that the rule was invalid. Specifically the court held, as it had opined in November, that the overtime rule exceeded the Department of Labor’s (DOL’s) rulemaking authority because it focused too heavily on employees’ salary levels—rather than the nature of their job duties—in determining overtime eligibility. The court found that this was contrary to the intent of the Fair Labor Standards Act and granted summary judgment to the plaintiffs.
On September 5, 2017, at the Direction of President Trump and Attorney General Sessions, the DOJ asked the Fifth Circuit to dismiss its appeal of the preliminary injunction. The Court granted the request on September 6 and dismissed the appeal, thus leaving the overtime rule all but permanently invalidated. As a result, the minimum salary for exempt status under the FLSA remains at $23,600.
So what’s next?
Technically, the DOL still has until September 30, 2017 to appeal the district court’s August 31 decision. An appeal is highly unlikely. What is more likely is that the DOL will go back to the drawing board to develop and issue a new revised overtime rule. Current Secretary of Labor Alex Acosta previously stated that he believes the salary threshold should be raised to $33,600 (substantially lower than the Obama overtime rule’s roughly $47,000 threshold), and in July 2017, the DOL issued a request for public comment on potential revisions to the Obama overtime rule. The deadline to submit comments is September 25, 2017, with a revised rule expected to issue thereafter. Employers should stay tuned for further updates.
Obama-Era Revisions to EEO-1 Form Abandoned
The second recent hit to President Obama’s workplace-law overhaul is the White House’s announcement suspending the Obama administration’s changes to the EEO-1 form. The revised EEO-1 form would have gone into effect March 31, 2018, and would have required employers with 100 or more employees and federal contractors with 50 or more workers to report W-2 wage information and total hours worked for all employees by race, ethnicity and sex within 12 proposed pay bands. The Obama administration had claimed that rewriting the form would help identify and reduce workplace wage discrimination. Opponents argued, on the other hand, that the new form was overly burdensome and would do little to accomplish its stated purpose, primarily because the aggregated pay data required for the form would not have compared people in the same job positions or controlled for the many other non-discriminatory variables that impact compensation. The time for reporting was also problematic, since it did not match the calendar year periods utilized by most HRIS programs.
On August 29, 2017, the White House Office of Management and Budget agreed with the opponents and stated that the pay collection and reporting requirements “lack practical utility, are unnecessarily burdensome, and do not adequately address privacy and confidentiality issues.” The White House explained its reasoning in a letter to the Chair of the Equal Employment Opportunity Commission, Victoria Lipnic.
So what’s next?
As a result of the announcement, the EEOC must publish a notice in the Federal Register announcing the immediate stay of new compensation and hours worked reporting requirements contained in the revised EEO-1 form and “confirming that businesses may use the previously approved EEO-1 form in order to comply with their reporting obligations for FY 2017.” Additionally, employers will not need to submit 2017 data until March 31, 2018.
This decision is welcome news for employers who have been struggling with the practical and potentially expensive challenges of complying with the new EEO-1 Form, including how to merge systems and payroll data to accurately and efficiently collect and calculate the requisite information. Nevertheless, as we previously posted, pay equity is an increasingly scrutinized issue—with more and more states passing laws imposing pay transparency obligations and prohibiting salary history inquiries of applicants. As such, employers should continue to stay abreast of these changes and ensure that compensation determinations are adequately documented and made in compliance with applicable laws.