The U.S. District Court for the Eastern District of Texas just entered a nationwide permanent injunction blocking the U.S. Department of Labor ("DOL") from implementing a controversial rule expanding overtime protections, saying the measure improperly created a salary-level test for determining which workers fall under the Fair Labor Standards Act’s ("FLSA") “white collar” exemption. This indefinitely stays implementation of the regulation, which doubled the minimum salary threshold required to qualify for the FLSA’s white collar exemption to $47,476 per year and created an index for future increases. State of Nevada v. U.S. Department of Labor, Civ. No. 16-000731 (E.D. TX. November 22, 2016).
The states sued the federal government, claiming that salary level does not necessarily reflect the kind of work an employee performs. The states argued that the DOL’s regulation disregarded the text of the FLSA by imposing a salary threshold without regard to whether an employee is actually performing bona fide executive, administrative or professional duties, which would exempt those workers from either overtime or minimum wages.
The district court agreed. It observed that although the DOL has “significant leeway” to establish the types of duties that might qualify an employee for the white collar exemption, nothing in the exemption indicates that Congress wanted the DOL to define employee classifications with respect to a minimum salary level. Thus, the it held that the DOL, in promulgated the final rule, exceeded its delegated authority and ignored Congress’s intent by raising the minimum salary level such that it supplants the duties test. The district court went on to observe that if Congress had intended for a salary requirement to supplant the duties test, then Congress and not the DOL should make that change, according to the ruling.
At this point, it is unclear whether the DOL will appeal this ruling to the Fifth Circuit Court of Appeals and, if it does, whether such an appeal would be heard or decided before December 1. Keep in mind that the district court's issuance of a nationwide injunction does not mean that the case is over or that the new DOL overtime rules are permanently barred. Assuming that the DOL is not granted an immediate appeal of the district court's ruling, the parties to the lawsuit will now engage in a period of discovery, motion practice and, ultimately, a trial on the merits. After a fact hearing, the district court may again decide that the DOL exceeded its authority in increasing the minimum salary threshold or it may issue an opinion and order holding that the rule was properly issued and dissolve the injunction. Of course, we will keep our eyes squarely focused on this litigation and will report any updates that might affect employers.
What should employers do now? Most employers – especially those who were waiting to December 1 to implement changes to comply with the rule – should probably just wait to see whether this decision is appealed and, if so, whether it is upheld. Those employers who have already adjusted to the new rule (by changing salaried employees to hourly and/or raised salaries to comply) must decide whether it is worth the effort and potential employee morale headaches to return to their old pay and classification practices. Unfortunately, there is no one-size-fits-all approach for employers facing these ever-changing issues. If you have any questions or need guidance on how this injunction might affect your company, please do not hesitate to contact Jed Marcus at firstname.lastname@example.org or Stuart Roberts at email@example.com.