Why it matters

The uncertainty surrounding the Department of Labor's (DOL) white collar overtime rule continues, with the agency requesting more time to continue its appeal of an injunction halting implementation of the rule. Last year, the agency published a final rule that established a salary floor below which executive, administrative and professional (EAP) employees must be paid overtime. The result: an increase from $455 per week (or $23,660 annually) to $913 per week (or $47,476 annually), with automatic updates every three years. A coalition of 21 states challenged the rule, which was set to take effect in December 2016. A district court judge granted a preliminary injunction in November, holding that "Congress intended the EAP exemption to depend on an employee's duties rather than an employee's salary." The DOL appealed to the U.S. Court of Appeals for the Fifth Circuit and sought an expedited review. But with the switch in administration, the agency has now requested a second extension to file its reply brief, seeking until May 1 to "allow incoming leadership personnel adequate time to consider the issues."

Detailed discussion

Last May, the DOL published the final regulations updating the so-called white collar exemptions 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 workers working in the lowest-wage Census region.

The rule also provided an increase to the total annual compensation level for Highly Compensated Employees (who must meet a minimal duties test) from $100,000 per year to $134,000 and created a mechanism to automatically update the salary and compensation levels every three years, starting January 1, 2020.

Before the final rule could take effect as scheduled on December 1, 2016, a coalition of 21 states filed suit, seeking a preliminary injunction. After reviewing the history of the FLSA and the white collar or EAP exemption, U.S. District Court Judge Amos L. Mazzant granted the motion.

Congress spoke clearly and unambiguously about the type of employees that must be exempt from overtime and the considerations to evaluate such employees, the court said, intending "the EAP exemption to apply to employees doing actual executive, administrative, and professional duties. In other words, Congress defined the EAP exemption with regard to duties, which does not include a minimum salary level."

The court was not persuaded that the exemption carries a status as well as a function component and found the DOL's delegation to define and delimit the EAP classification was limited by the plain meaning of the statute.

"Directly in conflict with Congress's intent, the Final Rule states that '[w]hite collar employees subject to the salary level test earning less than $913 per week will not qualify for the EAP exemption, and therefore will be eligible for overtime, irrespective of their job duties and responsibilities," Judge Mazzant wrote. "With the Final Rule, the Department exceeds its delegated authority and ignores Congress's intent by raising the minimum salary level such that it supplants the duties test. … The Department's role is to carry out Congress's intent. If Congress intended the salary requirement to supplant the duties test, then Congress, and not the Department, should make that change."

Although the DOL admitted that it cannot create an evaluation based on salary alone, the significant increase to the salary level created by the final rule was 'essentially a de facto salary-only test," the court added, with an estimated 4.2 million workers becoming eligible for overtime without a change in their duties.

The DOL filed an appeal with the U.S. Court of Appeals for the Fifth Circuit and requested an expedited review. Although the court approved the fast track, the January change in administration slowed down the process. The agency first sought an extension to file its reply brief—originally due January 31—until March 3. The federal appellate panel granted the unopposed motion.

But when President Donald Trump's initial nominee for Secretary of Labor, Andrew Puzder, withdrew his nomination, the DOL sought a second extension until May 1 "[t]o allow incoming leadership personnel adequate time to consider the issues." The federal panel granted the unopposed motion on February 22.

While employers wait to see what happens with the rule—and what stance the new nominee for Labor Secretary, Alexander Acosta, takes on the issue—a group of labor organizations filed a motion with the court to take over the case if the DOL drops its defense.

"With the recent presidential election, and particularly as more information becomes available regarding the incoming Administration's plans, policy, and appointments, the Texas AFL-CIL has grave concerns as to whether its interests in the Final Rule will be represented by the DOL," the group argued.

The court has yet to rule on the motion.

To read the opinion and order in Nevada v. DOL, click here.

To read the DOL's second request for an extension, click here.