Courtesy of Ice Miller LLP
In a stunning turn of events, a Texas federal district court has entered a preliminary nationwide injunction against the U.S. Department of Labor's (DOL) updated "white collar" overtime regulations. (Nevada v. U.S. Department of Labor, et al., 4:16-cv-000731-ALM (E.D. Texas Nov. 22, 2016)). Subject to rapid intervention by the Fifth Circuit Court of Appeals, the new rules, including the increased minimum salary requirement, will not go into effect on December 1.
To refresh, under the DOL's new rule, the minimum salary level for most white collar employees was set to increase to $913 per week, or $47,476 per year—about twice the current minimum ($455/$23,660). Additionally, the minimum salary for the "highly compensated" employee exemption would have bumped up to $134,000 annually. The new regulations also allowed employers to use certain bonus and incentive payments to account for up to 10% of the new salary level, and contained a mechanism for updating (i.e., increasing) the minimum salary every three years.
However, with the new rule only days away from implementation, Judge Amos L. Mazzant, of the U.S. District Court for the Eastern District of Texas determined that the DOL has exceeded its statutory authority by maintaining a minimum salary requirement as one of the criteria for (most of) the white collar exemptions. This conclusion was unexpected, to say the least, given that the white collar regulations have contained some level of minimum salary requirement since 1938, which is the year the FLSA was first effective.
It is important to note that the district court has issued only a preliminary injunction. It is possible (although seemingly unlikely) that Judge Mazzant could change his reasoning when he ultimately decides whether or not to issue a permanent injunction. Additionally, the decision could be stayed pending appeal (i.e., temporarily suspended) or overturned entirely by the Fifth Circuit. The forthcoming change in presidential administrations only adds to the uncertainty.
Given the lack of clarity as to the rule's short and long term fate, employers should proceed cautiously and consult with counsel prior to scrapping compliance plans or making any major compensation changes.
We will keep you posted as the fate and effects of this extraordinary decision come into greater focus.
For more information, contact Manolis Boulukos, Tami Earnhart, Paul Bittner or a member of Ice Miller's Labor, Employment and Immigration group.
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.