Why it matters

The litigation over the Department of Labor’s (DOL) controversial white collar exemption to the Fair Labor Standards Act (FLSA) continues to play out despite an earlier ruling striking down the new rule. In August, a Texas federal court judge granted an injunction against the Obama-era rule taking effect, invalidating the proposed changes. However, the DOL is keeping the dispute alive to appeal the issue of whether the agency has the authority to issue a new rule, recently filing a motion indicating its intent to appeal this question to the U.S. Court of Appeals, Fifth Circuit. In part an attempt to provide protection for federal agency authority generally, the move may also be intended to make a second shot at revising the exemption (the agency published a request for information in July on potential updates) more successful.

Detailed discussion

In May 2016, the Department of Labor (DOL) published the final regulations updating the so-called white collar exemption to the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA).

Pursuant to the final rule, the agency increased the minimum salary threshold from $455 per week (or $23,660 per year) to $913 per week (or $47,476 per year), equal to the 40th percentile of weekly earnings for full-time salaried employees working in the lowest-wage census region.

Before the final rule could take effect as scheduled on Dec. 21, 2016, a coalition of 21 states filed suit seeking a preliminary injunction. After reviewing the history of the FLSA and the white collar exemption (also referred to as the “EAP exemption,” for executive, administrative or professional capacity), U.S. District Judge Amos L. Mazzant granted the injunction.

The DOL sought interlocutory appeal to the U.S. Court of Appeals, Fifth Circuit, but the January 2017 change in federal administration slowed down the process.

Things sped up after Judge Mazzant issued a new ruling on Aug. 31, granting summary judgment in favor of the states and a coalition of 56 business groups. The final rule’s revision to the minimum salary threshold exceeded the DOL’s authority, the court found.

“Congress unambiguously directed the Department to exempt from overtime pay employees who perform ‘bona fide executive, administrative, or professional capacity’ duties,” Judge Mazzant wrote. “However, the Department created a Final Rule that makes overtime status depend predominantly on a minimum salary level, thereby supplementing an analysis of an employee’s job duties.”

Given this contravention of the intent of federal lawmakers, the court concluded that the final rule was not based on a permissible construction of the FLSA and that the DOL exceeded its authority.

A few days later, the DOL moved for voluntary dismissal of the earlier appeal as moot. However, the DOL now appears to be keeping the litigation alive, filing a notice in late October of its intent to appeal the opinion to the Fifth Circuit.

Why the change of heart? Under the current administration, the DOL has elected not to advocate for the specific salary level set in the Obama-era final rule. Instead, the DOL has opted to undertake further rule-making to determine what the salary level should be—while maintaining that the Secretary of Labor does have the authority challenged in the litigation.

To that end, the DOL issued a request for information, inviting comments “on the 2016 revisions to the white collar exemption regulations, including whether the standard salary level set in that rule effectively identifies employees who may be exempt, whether a different salary level would more appropriately identify such employees, the basis for setting a different salary level, and why a different salary level would be more appropriate or effective.”

The DOL received more than 140,000 comments in response.

A few days after the DOL appealed the determination with respect to the scope of its authority, it filed a subsequent motion to hold the appeal in abeyance while it undertakes further rule-making.

To read the notice of appeal in State of Nevada v. U.S. Department of Labor, click here.