On August 31, 2017, a federal court in Texas, which last year preliminarily enjoined the U.S. Department of Labor’s (DOL) Final Rule raising the minimum annual salary threshold for most "white collar" overtime exemptions under the Fair Labor Standards Act (executive, administrative and professional) from $23,660 to $47,476, issued a final judgment against the DOL in that case, thereby reinforcing the injunction. State of Nevada et al. v. United States Department of Labor, 2017 WL 3780085 (E.D. Texas 2017).

Background

On May 18, 2016, the DOL issued its Final Rule. See our discussion of the new regulations here

On November 22, 2016, the Texas district court issued a nationwide injunction barring enforcement of the Final Rule. The court reasoned principally that, while the FLSA granted DOL authority to define the executive, administrative, and professional exemptions, the DOL exceeded that authority by raising the minimum salary threshold to qualify for those exemptions so high that it created a "de facto salary-only test." See our discussion of the decision here.

The DOL appealed the preliminary injunction to the Court of Appeals for the Fifth Circuit, where it remains pending. Significantly, however, after the change in administrations, the DOL modified its position in the case. The DOL informed the Court of Appeals that it intends to withdraw the Final Rule and will issue a different rule with an increased salary threshold, but something lower than the amount used in the Final Rule. Nonetheless, the DOL intends to continue to prosecute the appeal in an effort to have the Court uphold its ability to use a salary-basis test as part of the exemption analysis.

Recent Ruling

In the recent ruling, the district court confirmed its prior conclusion that the DOL exceeded its authority in issuing the Final Rule. The district court, however, clarified that it was not holding that the DOL could not use a salary basis test. Indeed, the court acknowledged that, “the use of a minimum salary level in this manner is consistent with Congress’s intent because salary serves as a defining characteristic when determining who, in good faith, performs actual executive, administrative, or professional duties.”

Nonetheless, the district court found that the Final Rule went too far because it made “overtime status depend predominately on a minimum salary level, thereby supplanting an analysis of an employee’s job duties” and eliminating “a consideration of whether an employee performs ‘bona fide executive, administrative or professional capacity’ duties.”

Impact of Ruling

First, on September 5, 2017, the DOL asked the Court of Appeals to dismiss the pending appeal of the district court’s preliminary injunction, reasoning that it was now moot given the district court’s final decision. The DOL, however, retains the right to appeal the district court’s final decision.

Second, the thrust of the DOL’s appeal, as modified by the new administration, was to confirm its ability to use a salary basis test, at least at certain levels. The district court’s decision now appears to be aligned with the DOL’s position, although the full parameters of the DOL’s authority remains unclear. Therefore, it seems unlikely the DOL will pursue an appeal of the district court’s final decision.

Third, a final resolution of this issue likely must await new rulemaking from the DOL.