Removing Barriers Blog

District Court Rules: DoL’s Overtime Rule Remains Unenforceable
Posted September 01,2017 by ManojBhoi

Yesterday, the US District Court of the Eastern District of Texas ruled against the Department of Labor’s Overtime Rule in Nevada v U.S. Department of Labor (DOL).   If upheld, the rule would have increased the threshold for overtime pay eligibility by approximately double the previous rate and added several other compliance burdens including a required recalculation of salaries at a fixed percentile of 40 percent every three years. 

In November of 2016, the Court issued an emergency injunction stopping the DOL from enforcing its rule for overtime pay, which was set to go into effect on December 1, 2016. The injunction was effective nationwide and will stay in place unless there is further activity in the Courts.   

Credit unions had expressed concerns about the regulatory burdens associated with this rule. Overly burdensome and costly regulations mean that credit union members are not able to fully access the high-quality, affordable, and safe financial services that credit unions provide. It also means that resources that credit unions would otherwise apply to more fully serving their members are spent instead on compliance.  

The DOL's overtime final rule not only would add to the regulatory burdens for credit unions since a disproportional percentage of their employees are swept into the new threshold which has been nearly doubled, but it also has unintended negative consequences for those it aims to help, as well as credit union members. Credit unions in rural and underserved areas, as well as small credit unions particularly would particularly face compliance and regulatory burdens as a result of the rule.  

Small credit unions and those in rural and underserved areas would have been particularly harmed by this rule. About 35% of all credit unions have no employees making salaries over the DOL’s threshold, and approximately 46% of all credit union CEOs work at credit unions with $20 million or less in total assets. In certain areas, and at credit unions with smaller asset sizes, even CEOs can make below the threshold. 

The DOL’s rule magnifies the challenges credit unions are already facing due to an unprecedented amount of regulatory burden over the past several years. In the United States, there are approximately 2,700 credit unions with five or fewer employees, nearly 3,000 with less than $20 million in assets, and approximately 4,000 with less than $50 million in assets.  

CUNA is pleased with the decision because a more balanced rule, that produces fewer unintended consequences, would be more beneficial to both credit unions, employees, and members. CUNA also plans to respond to the DOL's Request for Information for this rule.