A federal judge in Texas has blocked the Fair Labor Standards Act’s new white-collar overtime exemption regulations. Ten days before their effective date, District Court Judge Amos Mazzant issued a nationwide preliminary injunction that temporarily prohibits the Department of Labor from implementing and enforcing the new white-collar overtime exemption regulations. As a result, the new regulations will not be going into effect on December 1, 2016.
In May 2016, the Department of Labor revised various white-collar overtime exemption regulations to:
- increase the minimum salary requirement from $455 per week ($23,660 annually) to $913 per week ($47,476 annually);
- increase the minimum annual compensation requirement for the highly-compensated employee exemption from $100,000 to $134,004; and
- create a process to automatically update the minimum salary and compensation levels every three years, beginning on January 1, 2020.
In September 2016, twenty-one states filed a lawsuit to challenge the legality of the new regulations. On the same day, more than 50 state and national business organizations filed a separate lawsuit challenging the regulations. Both cases were filed in the Eastern District of Texas and were later consolidated.
The plaintiffs filed an Emergency Motion for Preliminary Injunction to prevent the new regulations from going into effect on December 1, 2016. Though a number of arguments were made, Judge Mazzant, who was nominated by President Obama, ultimately determined that the DOL exceeded its delegated authority and ignored Congress’s intent by promulgating and attempting to implement the new regulations.
According to Judge Mazzant, Congress unambiguously intended the white-collar exemptions to depend on an employee’s duties rather than an employee’s salary. By significantly increasing the minimum salary level, the new regulations essentially supplant the well-established duties test. If the intent is to replace the duties test with a salary requirement, then only Congress can make the change, not the DOL.
Judge Mazzant noted that the new regulations would also be invalid because they are not based on a permissible construction of the FLSA and do not comport with Congress’s intent. The broad purpose of the white-collar exemptions was to exempt from overtime those engaged in executive, administrative and professional capacity duties. However, the DOL essentially created a de facto salary-only test by significantly increasing the minimum salary level.
Judge Mazzant ultimately concluded that the public interest is best served by a nationwide preliminary injunction that preserves the status quo until the case can be fully resolved on its merits. Since the DOL is currently prohibited from implementing and enforcing the new regulations, employers don’t have to change their wage and exemption practices for white-collar employees, at least for now.
The ultimate fate of the new regulations is uncertain. Though the preliminary injunction is temporary, this case can languish in court for more than a year. The DOL is currently considering all legal options. In the meantime, the Obama administration that initially directed the DOL to update the white-collar overtime exemption regulations will be replaced by a Trump administration that may direct the DOL otherwise.
Since the level of uncertainty and confusion surrounding the white-collar overtime exemptions has reached new heights, employers may benefit from having Employment Practices Liability Insurance to protect against various employment-related claims. Limited coverage for wage and hour claims may be available.
Please contact us if you would like to learn more about complying with the FLSA’s new (old) white collar overtime exemption regulations.
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