In May, we issued a blog discussing sweeping changes to the Fair Labor Standards Act (“FLSA”) overtime requirements. Click here to read our previous post.
As a recap, soon to be former President Obama instructed the Department of Labor (“DOL”) to “modernize” the FLSA’s overtime requirements, which mandate that employees who work overtime be paid at time and a half. One of the exceptions to that requirement is the so-called “white collar exemption,” which exempts certain executive, administrative, and/or professional employees from overtime, so long as they earn more than the minimum salary threshold of $23,660 annually (or $455 per week). Come December 1, 2016, however, the DOL adopted new standards, raising the minimum salary threshold to $47,476 annually (or $913 per week). A pretty big change, especially for small and mid-sized businesses.
On or around October 20, 2016, the State of Nevada and 20 other states from around the country filed suit in the Eastern District of Texas against the DOL’s Wage and Hour Division and their agents. These States asked the court for an “emergency preliminary injunctive relief,” meaning they wanted the court to stop the enactment of the new regulations, at least for the time being. Notably, various Chambers of Commerce and over 50 other business organizations also challenged the final rule. After extensive briefing, the federal court announced its decision just yesterday and, for the most part, employers couldn’t be happier.
In State of Nevada et al. v. United States Department of Labor, et al., Civil Action No. 4:16-CV-00731, Judge Amos Mazzant granted the plaintiff’s request for injunctive relief and ordered the DOL to stop enforcement of the new overtime regulations immediately, nationwide. According to the court, the DOL (and President Obama) exceeded its regulatory authority by unilaterally increasing the salary level to such a high amount without Congressional approval. The court ruled that the minimum salary threshold was intentionally set low to ensure the “duties test” (i.e., whether someone serves in an executive, administrative, or professional capacity) would be the primary focus, and not necessarily the amount of money they make. By increasing the salary threshold to almost $50,000, the court noted the DOL essentially replaced the duties test with a strict salary test. This the DOL cannot do without Congressional approval. The court also concluded that because the new regulations mandated an automatic increase to the salary level every three years, this amounted to administrative action without allowing the necessary public notice and comment period required for new agency actions.
Employers can now breathe a little easier, at least until the DOL decides to appeal. At the moment, employers can continue to operate and compensate employees pursuant to the current regulations. Of course, there may be many employers who worked hard to revise their compensation structures, and who are justifiably confused and frustrated at the moment. It may be a good time to revisit the issue and consult with legal counsel as to options moving forward. Of course, this halt may only be temporary, but with the new administration starting in January, the regulations could remain unchanged for some time.