Yesterday, November 22, President Obama appointee Amos L. Mazzant of the United States District Court for the Eastern District of Texas issued a nationwide preliminary injunction at least temporarily preventing enforcement of the Department of Labor’s new regulations concerning overtime under the Fair Labor Standards Act. Judge Mazzant ruled that the new regulations, announced in May, which proposed to raise the minimum salary level necessary for an otherwise exempt administrative, executive, or professional employee to qualify for the exemption from $455 per week ($23,600 annually) to $913 per week ($47,476) improperly “creates essentially a de facto salary-only test.” In the court’s view, “Congress did not intend salary to categorically exclude an employee with [exempt] duties from the exemption. Therefore, the Final Rule . . . is contrary to the statutory text and Congress’s intent.” (The court reconciled its position with the current $455 per week requirement by noting that the salary level test was designed only to screen out “obviously nonexempt employees,” so that no analysis of their duties would be required.) The court also determined that the Department of Labor lacked authority to institute the automatic updating mechanism of the regulations that would have increased the minimum salary level for the exemptions every three years.
The new regulations were scheduled to take effect on December 1, 2016, and many employers have already taken steps toward compliance. These facts heighten the possibility of an expedited appeal in an effort to clarify the issue prior to December 1st, but much uncertainty currently remains. In any event, although the court’s action is only preliminary and may later be reversed either in the course of the current action in the district court or on appeal, it is an open question how aggressively, if at all, the Department of Labor under the incoming Administration would pursue such actions. Plaintiffs’ lawyers, of course, can be expected to continue to pursue private actions aggressively should the injunction ultimately be reversed and the regulation validated. For at least the present time while the injunction is in effect, therefore, it appears that employers may continue to treat as exempt their otherwise eligible administrative, executive, or professional employees, even if they make less than $913 per week. Employers will need to consider both legal issues and practical business realities in deciding how to proceed and what steps to take, if any, with respect to employees potentially affected by the regulation given the present uncertainty. The case is State of Nevada, et al. v. United States Dept. of Labor, et al., No. 416-CV-00731 (E.D. Texas). Please contact us if you have any questions or would like to discuss the implications of the court’s ruling for your business.