On November 22, just eight days before the much-discussed amendments to the overtime provisions of the Fair Labor Standards Act (FLSA) (Final Rule) were scheduled to take effect, a federal district court judge for the Eastern District of Texas issued a nationwide preliminary injunction, blocking the implementation of the Department of Labor’s (DOL’s) expanded overtime provisions. Among other changes, the Final Rule would have raised the minimum salary threshold for the most common “white collar” overtime exemptions (i.e., executive, administrative and professional) from $23,660 a year to $47,476 a year, or from $455 a week to $913 a week. The Final Rule made no changes to the duties test.
Twenty-one states sued the DOL seeking to halt implementation of the Final Rule, and Judge Amos L. Mazzant III approved the requested relief. Remarkably, Judge Mazzant concluded that the FLSA does not grant the DOL the ability to utilize a salary-level test because Congress intended the “white collar” exemptions “to depend on an employee’s duties rather than an employee’s salary.” Judge Mazzant concluded that the DOL exceeded its delegated authority and ignored Congress’s intent by raising the minimum salary level so much that it would supplant the duties test. He concluded that such a “de facto salary-only test” did not comport with Congress’s intent and was, therefore, unlawful.
Many employers have already raised salaries or informed otherwise-exempt employees that they would receive a pay increase to more than $47,476, effective December 1. Other employers have informed exempt employees whose salaries are under the Final Rule threshold that they will now be considered hourly employees and eligible for overtime. For the time being, employers no longer have an obligation under the FLSA to make such changes to pay practices. However, from an employee morale perspective, it could be very difficult for employers that have announced a raise to renege on that promise. Employers that have already advised employees that their salaries will change and that plan to rescind those changes as a result of the preliminary injunction should consult with legal counsel.
In a written statement, DOL representatives said that they "strongly disagree with the decision by the court" and "are currently considering all of our legal options." However, even if the court ultimately lifts the injunction, the delay in the effective date of the Final Rule increases the likelihood that President-elect Donald Trump would seek to revise the regulation through rulemaking or legislation. The Trump administration or Congress could produce a rule or law with a lower minimum salary threshold or exemptions for small businesses. It is also possible that the new administration does nothing to defend the Final Rule and no revisions are made to the overtime rules. We will continue to monitor all judicial, DOL and congressional actions, and will keep you advised.