In a stunning rebuke of the Obama administration’s two year effort to game change the overtime pay rules, the United States District Court for the Eastern District of Texas yesterday afternoon issued a preliminary injunction effective immediately preventing the implementation of the new white collar salary rule. As discussed in previous e-alerts, the Department of Labor’s final rule, that was scheduled to take effect on December 1, 2016, more than doubled the minimum salary threshold an employer needed to pay a white collar employee in order for that employee to qualify to be exempt from overtime. The minimum salary threshold was scheduled to increase from a weekly salary of $455.00 to a weekly salary of $913.00.
Judge Amos Mazzant ruled that the DOL lacks the authority to impose a minimum salary as part of the overtime exemption. The Court’s opinion states that when Congress passed this particular overtime exemption in 1938, Congress provided the exemption to those employees who were employed in a bona fide executive, administrative or professional capacity. Since Congress did not impose a minimum salary component to the exemption, the DOL therefor lacked the authority to do so through rulemaking. Judge Mazzant’s decision is groundbreaking as the DOL has, since the passage of the Fair Labor Standards Act, established through regulation a minimum salary for this white collar exemption. In 1938, DOL set the minimum salary threshold at $30.00 a week. Notably, Judge Mazzant was an Obama nominee and has held this post for a little over two years.
What next? The Obama administration will likely seek an expedited appeal. Even if that happens, it is highly unlikely that an appeal would be decided by December 1. For those employers who have provided pay raises to increase certain employees to the minimum annual salary of $47,476.00, it would be extraordinarily difficult to pull back those pay increases from an employment relations perspective. However, employers can choose to delay converting employees earning less than $47,476 to nonexempt status provided those employees still satisfy the job duties test.
The Bennett Law Firm is available to assist clients in determining how to respond to this new development regarding the white collar exemption. If you have any questions or would like guidance on recommended next steps, please contact additional guidance, please contact Peter Bennett (pbennett@thebennettlawfirm.