DOL Rule Raising Salary Threshold for Exempt Employees STRUCK DOWN

By Amanda Jansen

Remember that Department of Labor rule that was supposed to go into effect December 1, 2016 that would have raised the minimum salary for exempt employees from $455 per week to $913 per week? Either way, forget about it—it has now been struck down by a federal judge in Texas.

If you’re asking yourself, “Didn’t that already happen?,” the answer is “sort of.” Back in November of 2016, the court had entered a temporary injunction that stopped the rule from going to effect on December 1. The Obama administration’s Secretary of Labor, Tom Perez, immediately appealed that ruling to the Fifth Circuit Court of Appeals. Then President Trump took office, Alexander Acosta replaced Tom Perez as Secretary of Labor, and the DOL suddenly had a change of heart about the litigation and the fate of the rule. Meanwhile, Judge Amos Mazzant in the Eastern District of Texas, continued considering the case, having refused to stay the action pending the appeal.

Fast forward to August 31, 2017: ruling on a motion for summary judgment filed by 55 states and chambers of commerce (as well as former Governor Terry E. Branstad), Judge Mazzant concluded “the Department’s Final Rule described in 81 Fed. Reg. 32,391 is invalid.” The reasoning for the court’s decision is based on the Chevron doctrine from administrative law. Basically, the court found the Department of Labor overstepped its rulemaking authority by making a rule inconsistent with Congress’s intent under the FLSA to exempt from overtime-pay requirements bona fide executive, administrative and professional employees. The $913/week minimum salary threshold ($47,476) was so high that it would have made many employees who performed exempt duties (e.g., managers) non-exempt because they did not meet the minimum salary.

In a nutshell: 

The Final Rule more than doubles the previous minimum salary level. By raising the salary level in this manner, the Department effectively eliminates a consideration of whether an employee performs “bona fide executive, administrative, or professional capacity” duties. … Congress was clear that the [exemption] determination should involve at least a consideration of an employee’s duties. … The Department has exceeded its authority and gone too far with the Final Rule.

So, what now? While, theoretically, the DOL could appeal this ruling to the Fifth Circuit, it appears more likely that they will go back to the drawing board and revise the rule. On July 26, 2017 the Department of Labor published a Request for Information (RFI) asking for the public’s input on how executive, administrative, and professional employees should best be identified as exempt from overtime. You can view the RFI here and submit comments here. Comments will be accepted until September 25, 2017.