By: Sharon Gold
In September, 21 states and numerous business groups sued the U.S. Department of Labor (DOL) in a Texas Federal Court attacking the DOL’s Final Rule that raised the salary minimum for workers to be exempt from overtime requirements under the Fair Labor Standards Act (FLSA). The states filed a motion for preliminary injunction asking the judge to enjoin enforcement of the Final Rule pending a final resolution of their legal arguments against the Rule. The businesses moved for summary judgment.
Late yesterday, Judge Amos L. Mazzant, III, an Obama appointee, entered a nationwide injunction blocking the Final Rule. The Court held that the DOL lacked authority to “categorically exclude an employee with [exempt] duties from the exemption.” Opinion at 14. In particular, the Judge held that the statutory text of the FLSA exempts certain workers, including those performing executive, administrative, and professional duties. The FLSA itself does not require a salary minimum; that requirement was added by the DOL through regulation, and it has periodically been raised over the years. Currently it is $455 per week. The Final Rule drastically increased the salary minimum to $913 per week and required automatic updates to the salary minimum every three years, resulting in estimates that 4.2 million more workers would become eligible for overtime because their salaries did not meet the increased threshold. The Judge held this effectively displaced the duties requirements of the FLSA and exceeded the DOL’s authority.
Where does this leave employers now? The DOL’s Final Rule is temporarily blocked on a nationwide basis, which means that employers can put on hold any plans to convert employees to non-exempt or raise their salaries to keep them exempt. Employers who have already implemented changes in order to comply with the Final Rule must carefully consider their options. It is important to note that the injunction is temporary, the district court has yet to enter a final decision, and the DOL may appeal. With a new administration taking control in January, it is possible that any support for the government’s current position may be withdrawn. We will have to wait and see.
The duties tests were not changed by the Final Rule or challenged in the Texas lawsuit. Employers must continue to ensure that employees are properly classified based on their job duties.
Does the current salary minimum apply? Yes. As of now, in order to qualify as exempt, an employee must perform exempt job duties and receive a salary that is not less than $23,660 annually ($455 per week) or $100,000 annually for highly compensated workers under the FLSA. Some may argue that there cannot be any salary requirement after the Judge’s ruling that the DOL lacked authority to issue the Final Rule. However, the Judge’s opinion was based on the magnitude of the salary increase and the fact that it displaced the FLSA’s duties tests. In addition, Kentucky still has a salary minimum under the Kentucky Wage and Hour Act of $455 per week/$23,660 per year or $100,000 per year for the highly compensated employee.
We will keep you posted on any further developments here. If you have any questions, please contact your Wyatt attorney.