New Overtime Rules Under The FLSA On Hold
The new overtime rules under the Fair Labor Standards Act (FLSA) that were scheduled to go into effect on December 1, 2016 have been put on hold based upon a nationwide preliminary injunction granted by a Texas federal court. In response to a lawsuit filed by 21 states and more than 50 business groups against the U.S. Department of Labor (DOL), U.S. District Judge Amos L. Mazzant of the Eastern District of Texas heard arguments from both sides on the legality of the DOL’s Final Rule published on May 23, 2016.
Generally, white collar employees are exempt from overtime if they are salaried, make more than the salary threshold set by the DOL and their primary duties are consistent with executive, professional or administrative definitions as outlined by the DOL (EAP exemption). The Final Rule increased the minimum salary level for overtime exempt employees from $455 per week ($23,660 annually) to $913 per week ($47,476 annually) effective December 1, 2016. The Final Rule also established an automatic updating mechanism that would adjust the minimum salary level every three years.
In its decision, the Court considered the EAP exemption that applies to employees performing actual executive, administrative and professional duties. The Court acknowledged that, in the FLSA, Congress defined the EAP exemption with regards to the duties performed by the employee and did not include a minimum salary level. The current minimum salary-level test was implemented in 2004 through DOL regulations that interpret the EAP exemption. The Court questioned the lawfulness of the Final Rule and specifically, the increase in the salary-level test. The Court stated that the increase in the minimum salary level through the Final Rule supplants the duties test. The Court made the preliminary findings that Congress did not intend salary to categorically exclude an employee with executive, administrative and professional duties from the EAP exemption and further, that the DOL lacks the authority to implement the automatic updating mechanism.
While the injunction is only temporary, it will maintain the status quo until the Court can issue a final decision on the merits as to the lawfulness of the Final Rule. This decision delays the implementation of the Final Rule that would extend overtime to an estimated 4.2 million workers. If you have any questions regarding the new overtime rules and the current state of the law, call 610.820.5450.