A federal judge in the Eastern District of Texas entered a nationwide preliminary injunction yesterday, blocking for now the U.S. Department of Labor (“DOL”) from implementing significant changes to the overtime rules applicable to white collar employees (the “Final Rule”). The Final Rule was set to go into effect on December 1, 2016.
The Final Rule, issued earlier this year, would have changed the minimum salary needed for an employee to be exempt from the overtime protections of the Fair Labor Standards Act (“FLSA”). Under the Final Rule, the minimum salary for exempt employees jumped from $455 per week ($23,660 per year) to $913 per week ($47,892 per year), with further increases set to occur every three years beginning in 2020. Though the DOL sought to alter the salary component of the white collar exemptions, it did not change the “duties test,” which requires an exempt employee to perform job duties of an executive, administrative, or professional nature. Twenty states and over fifty business organizations have challenged the Final Rule in a lawsuit now pending in the Eastern District of Texas.
On November 22, 2016, the court determined that the DOL likely exceeded its authority by more than doubling the existing salary threshold, effectively rendering the duties test all but irrelevant. The court emphasized that the duties test—not the salary level test—lies at the heart of the white collar exemptions, as the duties test is expressly set forth in the FLSA. Accordingly, the court granted a preliminary injunction, ordering the DOL not to implement and enforce the Final Rule until further notice.
Companies should proceed with caution despite the ruling. The ruling is temporary, could be appealed, and DOL has not stated its plans in the wake of the ruling. Whatever the minimum salary, misclassification of workers remains an enforcement priority for the DOL, and an attractive issue for litigation by the private plaintiffs’ bar.
This case is State of Nevada et al v. United States Department of Labor et al., Case No. 4:16-cv-00731-ALM, in the United States District Court for the Eastern District of Texas. Click here for the full text of the preliminary injunction.