On November 22, 2016, a mere 10 days before it was to take effect, a Texas federal judge halted, at least temporarily, the implementation of the U.S. Department of Labor’s (DOL) new regulation significantly raising the minimum salary requirement for the white collar exemptions under the Fair Labor Standards Act (FLSA). Judge Amos Mazzant III of the U.S. District Court for the Eastern District of Texas issued a nationwide injunction preventing the DOL’s new regulation from taking effect on December 1, 2016, as planned.
The FLSA exempts certain employees from the federal overtime requirement if the employee’s position satisfies a duties test and the employee’s compensation satisfies a salary test. Under the new rule, employers would be required to pay employees classified as exempt under the executive, administrative and professional exemptions a minimum annual salary of $47,476 – a dramatic increase from the prior federal salary requirement of $23,660. The significant increase in the required salary would lead many employees to be reclassified as nonexempt and render them eligible for overtime pay or force employers to significantly increase salaries to comply with the enhanced salary requirement under the FLSA.
Judge Mazzant’s decision to grant a preliminary injunction blocking the implementation of the DOL’s new rule on December 1 was based on his determination that the DOL acted outside its authority by raising the salary requirement for the white collar exemptions. The court theorized that the DOL’s proposed increase in the minimum salary requirement rendered an employee’s salary level the deciding factor in determining whether an employee was properly classified as exempt, rather than the duties performed by the employee. The court found the fact that the change in the regulations would cause millions of workers to be reclassified as nonexempt based purely on their salary level, without any substantive changes in their duties, was not authorized under the FLSA.
On what would have been the first day the new regulation would have been in force – December 1, 2016 – the DOL appealed the preliminary injunction to the Fifth Circuit Court of Appeals. Regardless of what the Fifth Circuit decides, the fate of the DOL’s FLSA regulation may be in peril with the Trump administration taking office in January.