DOL's Final Rule Increasing Minimum Salary for FLSA Exemption Enjoined Nationwide: E.D. Texas
In State of Nevada v. United States Department of Labor, a judge in the US District court for the Eastern District of Texas granted a preliminary injunction enjoining the US Department of Labor's (DOL) Final Rule updating the overtime exemption regulations of the Fair Labor Standards Act (FLSA). The Final Rule was published in May 2016 and was to take effect on December 1, 2016. The injunction temporarily stays implementation and enforcement of the Final Rule on a nationwide basis.
On November 22, 2016, in State of Nevada v. United States Department of Labor, a judge in the US District Court for the Eastern District of Texas granted a preliminary injunction enjoining the DOL's Final Rule updating the overtime exemption regulations of the FLSA that was published in May 2016. The injunction:
Was sought by 21 states and a coalition of business groups.
Temporarily stays implementation and enforcement of the Final Rule on a nationwide basis.
The DOL's Final Rule, which was to have taken effect on December 1, 2016, among other things:
Doubles the minimum salary required for exemption from overtime of executive, administrative, and professional employees (also known as EAP or white collar exemptions) from $455 to $913 per week, as well as increases the minimum compensation level for the highly compensated employee exemption.
Establishes a mechanism to automatically update the salary and compensation levels every three years to:
maintain certain specified percentiles; and
ensure they continue to provide effective tests for exemption.
Makes no changes to the duties test.
Judge Amos Mazzant held that the plaintiffs demonstrated a likelihood of success on the merits in challenging the Final Rule as unlawful, determining that:
The plaintiffs could make a prima facie showing that the Final Rule should not be given Chevron deference and exceeds the DOL's delegated authority under Chevron because the Final Rule:
directly contradicts Congress's intent in the FLSA that the EAP exemption depend on an employee's duties rather than an employee's salary; and
replaces the FLSA's duties test with a "de facto salary-only test" requiring that an employee earn at least $913 each week to qualify for the EAP exemption.
Since the Final Rule was unlawful:
the DOL lacked authority to implement the automatic updating mechanism in the Final Rule; and
the court did not need to address the plaintiffs' position that the automatic updating mechanism violates the Administrative Procedure Act (APA) by adjusting salary levels without a notice and comment period.
The plaintiffs showed they were likely to suffer irreparable harm absent a preliminary injunction due to the significant costs of complying with the Final Rule that would, in turn, reduce their ability to provide beneficial government services, an injury that could not be redressed through a judicial remedy.
Balancing of hardships favored granting a preliminary injunction because:
if the Final Rule took effect, the plaintiffs would be required to spend significant public money that they could not later recover;
the Final Rule interferes with government services and causes administrative disruptions, employee terminations or reclassifications; and
the DOL failed to show it would suffer any harm if the Final Rule's implementation were delayed.
A preliminary injunction was in the public interest because if the Final Rule is ultimately found:
invalid, then the public will not be harmed by its enforcement; or
valid, then an injunction simply delays the Final Rule's implementation.
A nationwide injunction, as opposed to an injunction limited only to states that showed irreparable harm, was appropriate because the Final Rule applies to all states and its scope extends nationwide (Texas v. United States, 2016 WL 4426495, at *17 (N.D. Tex. Aug. 21, 2016)).
UPDATE: On December 8, 2016, the US Court of Appeals for the Fifth Circuit granted the DOL's request for expedited briefing on its appeal of the district court's preliminary injunction ruling. The DOL's opening brief is due December 16, 2016, and its reply (closing) brief is due January 31, 2017. Oral argument is scheduled to follow soon after the close of briefing. However, because President-elect Trump takes office on January 20, 2017, this schedule could mean the new administration (or the new Congress) will decide the fate of the DOL's final rule before the Fifth Circuit issues a decision.
Employers should consider tracking all working time and limiting, where possible, overtime hours worked by exempt employees whose salary level is less than $913 per week, at least until the future of the DOL's final rule is more certain.