Public and private employers throughout the United States received an early holiday gift from a United States district court in Texas on November 22, 2016. As I have discussed previously in this blog, the United States Department of Labor (DOL) issued new rules earlier this year substantially changing the federal law criteria for determining which employees can be deemed “exempt” from overtime requirements. Those new rules were to go into effect December 1, 2016. Currently, to be considered exempt from overtime requirements, an employee had to perform executive, administrative, or professional duties (the “duties test”); had to be paid a set weekly salary that did not change based upon the number of hours worked (the “salary level test”); and, pertinent to the current discussion, had to be paid at least $455.00 per week ($23,660 annually). This last criteria is referred to as the “minimum salary test.”
The DOL’s new rules pertained only to the minimum salary test by raising it from $455.00 per week ($23,660 annually) to $921.00 per week ($47,892 annually). In short, an employee currently treated as exempt who after December 1, 2016 earned less than $921.00 per week could no longer be treated in that manner and would be subject to overtime pay requirements. This was true even if that employee genuinely performed executive, administrative, or professional duties.
Shortly after the DOL issued its Final Rule regarding these changes in May 2016, a number of public and private employers (including 21 state governments) filed suit in a United States district court situated in Texas challenging the new rule and requesting an immediate injunction precluding implementation of the rule. On Tuesday, November 22, 2016, the federal court issued a Memorandum Opinion and Order imposing a nationwide injunction against implementation of the new overtime rules. The result of this ruling is that employers need not comply with new rules, at least until the same court that issued the preliminary injunction issues a final decision to the contrary, or its ruling is reversed on appeal to the United States 5th Circuit Court of Appeals.
The grounds offered by the federal district court in support of its stay are, in my opinion, somewhat questionable. Essentially, the district court noted that the text of the Fair Labor Standards Act (FLSA) does not reference any salary criteria as an aspect of carrying out executive, administrative, and professional duties as an employee. The court then reasoned that a 100%+ increase in the minimum salary test to over $47,000 would essentially become the sole criterion for the overtime exemption, completely supplanting the duties test, which is referenced in the text of the FLSA. Quite curiously, the district court opinion implied that the DOL has no authority to impose any level of salary minimum in the analysis, despite decades of doing so without any serious judicial questioning of that authority.
Under normal circumstances, I would expect this injunction to be temporary, pending only reversal by a higher federal court. The fact is, however, that the results of the recent presidential election will most likely render this debate moot. It seems evident that the incoming Trump administration, coupled with a Republican majority in both houses of Congress, will make it a priority to prevent implementation of the proposed overtime law changes, whether by Congressional action or by the administrative rule making process.
If you would like to speak to John Lawhorn on this or any other matter, he may be reached at (865) 546-9321.
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