Firm News

March 27, 2017

New DOL Overtime Rule Blocked by Federal Court in Texas (March 2017)

Filed under: Legal Updates — marybjohnson @ 12:36 pm

A federal court in Texas has put on hold (for now) nationwide implementation of the new rule by the U.S. Department of Labor (DOL) raising the salary requirement for certain types of employees to be exempt from federal overtime requirements.

The New DOL Overtime Rule

Earlier this year, the DOL issued a new rule that changed the requirements for overtime exemptions under the federal Fair Labor Standards Act (FLSA) for executive, administrative, and professional employees by raising the required salary level from about $23,660 per year to $47,476 per year.  Under the new rule, the salary threshold would automatically reset (presumably increase) every three years.  There has been a large outcry among employers and business groups since the new rule was announced.  It was scheduled to take effect on December 1, 2016.

The injunction means that the DOL’s new rule will not go into effect as of December 1 unless the court takes additional action or an appeals court issues a decision before then, there likely will be an appeal, and it is unclear whether the new rule ultimately will be invalidated in whole or in part.

The Court’s Ruling

On November 22, 2016, US. District Judge Amos Mazzant issued an order enjoining nationwide implementation of the DOL’s new rule “pending further order of this Court.”  This means that thousands of employers will not be required to meet the heightened salary threshold for FLSA overtime

Exemptions for executive, administrative, and professional employees.

The Court’s Memorandum Opinion and Order concludes that the DOL did not have authority to set a heightened salary threshold and effectively supplant the “duties test” for these exemptions.  The Court reasoned that Congress intended these exemptions to depend on the employees’ duties, not on their salary levels.

The Court also noted, but did not address, an argument that the new rule’s mechanism for automatically resetting the required salary level every three years is invalid because it would not include a separate public notice and comment process required for new administrative regulations.

What This Ruling Means For Employers

The Court’s injunction means that employers are not required to comply with the DOL’s new rule pending further ruling from the Court, which means that salary increases are not necessary at this time.  Thus, employers may decide to postpone implementing or announcing any salary increases that are being planned solely to comply with the new rule.  (If employers already have increased salaries in contemplation of the new rule, they should consider employee relations issues changes.)

Employers also may decide to postpone reclassifying salaried employees who are currently deemed exempt to non-exempt, to the extent such changes are being planned solely because of the DOL’s new rule.  However, to the extent employers have salaried employees who do not meet the duties test for an exemption (regardless of the new salary level requirement), employers should not necessarily delay reclassifying them as non-exempt (hourly or salaried) to comply with existing law, given that the new rule only relates to the salary level and not the duties requirement.

We will be glad to discuss your Company’s specific situation and how the recent ruling may affect its plans.  Please do not hesitate to contact us.

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