We reported previously about a November 22, 2016 preliminary nationwide injunction issued by Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas, blocking the Department of Labor from implementing changes to the Fair Labor Standards Act (FLSA) that were due to take effect on December 1, 2016. These new rules, as promulgated by the Obama Administration, would have dramatically increased the minimum salary required for an individual to be considered “exempt” from the overtime pay requirement under the FLSA. The Obama Administration sought to nearly double the earnings requirement to be considered an exempt employee by increasing the threshold to $913 per week ($47,476 annually for a full-year worker) from its current threshold of $455 per week ($23,660 annually for a full-year worker).
Although the Obama Administration immediately appealed the injunction, the Department of Labor under President Trump eventually withdrew the appeal, allowing the court to issue a final ruling on the constitutionality of the proposed salary threshold.
On August 31, 2017, the court issued its ruling, holding that the Obama Administration’s changes to the FLSA overtime rules were unconstitutional. The court held that the new minimum salary rule was unlawful because it exceeded the Department of Labor’s delegated authority under the FLSA. The court did not decide whether a smaller increase in the salary requirement would be lawful, but suggested that increases that merely tracked inflation would be consistent with the Department’s grant of authority under the FLSA.
What does this mean for employers?
The court’s ruling means that the Obama Administration’s proposed rule will not go into effect. The salary threshold for exempt employees will remain at $455 a week or $23,660 a year. This does not mean, however, that the current salary threshold is permanently capped at $455 a week. Secretary of Labor Acosta indicated during his confirmation hearings in March 2017 that a more modest increase in the salary threshold was likely appropriate.
The Department of Labor has recently issued a “request for information,” asking for public input regarding an appropriate salary level that would effectively identify employees who should be exempt from the FLSA. The request also seeks public input on whether the Department of Labor should update other aspects of the test for exempt employees. Written comments had to be submitted to the Department of Labor by September 25, 2017. And though the current administration is unlikely to pursue an appeal of the court’s ruling, the Texas AFL-CIO may continue its efforts to intervene in the case in order to appeal.
Although the state of the salary threshold remains static for the moment, it is likely that the Trump Administration will try to make additional changes to the FLSA. Employers, therefore, should remain attentive to any new proposed rules set forth by the Department of Labor as well as any resulting legal challenges.
Please continue to follow our blog for important updates on the FLSA, employment, and labor law. If you find that your business may be affected by any upcoming rule changes, please contact Andrea Johnson or Scott Assenmacher and we can assist you in determining the best course of action.