On August 31, 2017, the U.S. District Court for the Eastern District of Texas put what is likely to be the final nail in the coffin of the Obama-era Department of Labor’s regulation that would more than double the salary required to exempt executive, administrative, or professional employees from the FLSA’s overtime rules. The DOL estimated that this rule would render approximately 4.2 million additional workers eligible for overtime.
The Court in State of Nevada, et al. v. U.S. Dept. of Labor had granted the plaintiffs, which were comprised of business groups and state governments from across the nation, a preliminary injunction last November to prevent the regulation from going into effect. Last Thursday, the same Court granted the plaintiffs’ summary judgment motion, thereby ending the case and striking down the rule permanently. While the DOL could appeal this judgment, the consensus is that the current administration is unlikely to do so.
In reaching its decision, the Court reasoned that, in order for an employee to meet the exemption at issue, an employee must: (1) be salaried; (2) be paid above a minimum salary level; and (3) perform executive, administrative, or professional capacity duties. At the current salary threshold ($23,660.00), the minimum salary requirements acts to screen out those employees who are not performing bona fide executive, administrative, or professional duties. Such a steep raise in the minimum salary test (to $47,476.00) would effectively eliminate the duties test for a large number of employees who were performing such duties previously, merely because their salaries did not meet this new threshold. Thus, in the Court’s eyes, the duties test would be rendered meaningless.
During confirmation hearings, DOL Secretary Acosta indicated that he would consider some raise in the minimum salary test, but that he would not go so far as the previous Secretary. Thus, it is possible that this issue will come up again in the next few years, but it is unlikely that any change proposed will be as dramatic as the prior, struck-down rule.
You can read the decision here. If you have any questions regarding this ruling or the FLSA overtime exemptions, give us a call.