In a long awaited decision, a Texas federal judge struck down the Fair Labor Standards Act (“FLSA”) overtime rule finding that the Department of Labor (“DOL”) exceeded its delegated authority. The rule, which was blocked by injunction in November 2016, was set to raise the white collar exemption minimum salary requirement from $23,660 per year to $47,476 per year effective December 1, 2016.
The FLSA sets the federal minimum wage for all hours worked and provides that employees are entitled to overtime pay at one and one-half times the employee’s regular rate of pay for all hours worked above forty in a workweek. The FLSA, however, contains a number of exemptions from the overtime requirement, which requires an analysis of both the employee’s duties and salary.
In 2014, President Obama directed the Secretary of Labor to “modernize” the overtime regulations. Thereafter, the DOL issued a rule that would have doubled the salary level for exempt employees. Just days before the rule would have taken affect, 21 states sued for a preliminary injunction challenging the DOL’s authority.
The court granted summary judgment in favor of the plaintiffs finding the DOL does not have authority to use the salary level requirement to eliminate the duties requirement. The court stated that Congress intended “bona fide executive, administrative, or professional” employees to be exempt from overtime and the rule’s “significant increase” in the salary requirement would essentially render the duties requirement meaningless.
What does this mean for employers? Many employers planned to move certain categories of employees to nonexempt status, but halted those efforts after the rule was blocked. Employers are still required to analyze each employee’s duties and salary to determine if the employee is exempt from overtime. Therefore, employers should continue to review employee classifications and modify positions as needed.
The case is State of Nevada, et al v. United States Department of Labor, et al, case number 4:16-cv-00731, United States District Court for the Eastern District of Texas. The decision is available here.
