federal court declared Obama-era overtime rules invalid just in time for Labor
Day. On August 31 the U.S. District Court for the Eastern District of Texas
issued an order explaining that rules implemented under the Fair Labor
Standards Act (FLSA) during the last months of the Obama administration
overreached the Labor Department’s ability to interpret FLSA. The decision can
be found here: Nev. v
U.S. Dep’t of Labor, No. 4.16-cv-00731-ALM, (E.D. Tex. Aug. 31, 2017) (Memo.
Op. and Order). The same court issued a preliminary injunction in November 2016
that prevented the rule from going into effect on December 1, 2016, as the
Obama administration planned. The district court’s final judgment likely means
the rule that more than doubled the previous minimum salary requirements to
exempt employees from minimum-wage and overtime requirements is permanently
Which employees does this affect?
ruling affects employers and employees who are governed by FLSA. Some employees
are exempt under FLSA’s requirement that they receive minimum wage and time and
a half for all work over forty hours in a single work week. Determining which
employees are exempt involves several criteria: 1) the employee must be paid on
a salary or, in some cases, fee basis, 2) the salary or fee must be above a
minimum amount, and 3) the employee must perform executive, administrative, or
invalidated rules would have increased the minimum salary for exempt employees
from $455 a week to $913 a week, or from about $23,600 a year to about $47,500
a year. In other words, employees making between $23,600 and $47,500 a year who
are now treated as exempt employees would become nonexempt. Employers could
have given raises to meet the minimum salary. Otherwise, the affected employees
would be entitled to overtime and minimum wage.
though the ruling is from a court in Texas, it applies throughout the United
States. Some groups have challenged the national application of the order
issued by the district court in Texas, but those efforts have been
unsuccessful. And the Trump administration’s Department of Labor has indicated
to the Fifth Circuit that it will seek to address the obstacles articulated in
the recent order by further rulemaking. In fact, Secretary of Labor Alexander
Acosta has made comments leading many to believe that the Trump administration
will likely set a minimum salary level somewhere between $650 to $700 a week,
or $34,000 to $36,000.
Why did the court strike down the rule changes?
district court’s decision, similar to much of the public criticism of the
proposed rule changes, focused on the degree to which the minimum salary would
have increased. Because the change would have more than doubled the lowest
salary for exempt employees, the court reasoned that the rule would have gone
beyond what Congress intended in FLSA by making the amount paid the most
important criterion for determining whether an employee is exempt from the
overtime and minimum-wage requirements.
court looked to FLSA’s language creating the exemption for “any employee
employed in a bona fide executive, administrative, or professional capacity.”
The court interpreted this phrase to mean Congress meant the exemption to rely
on duties. Because the changes would have more than doubled the minimum salary,
they “would essentially make an employee’s duties, functions, or tasks
irrelevant if the employee’s salary falls below the new minimum salary level.”
Since there is a substantial number of employees whose duties are executive,
administrative, or professional who are paid the new minimum amount, the
changes would have made salary the predominant criterion for exemption.
What does this mean for employers?
that were concerned about complying with the FLSA rule changes may be reassured
that they will very likely not need to make dramatic changes. As mentioned,
there will likely be a substantial increase to the same salary minimums, but it
will be a much less dramatic one. The invalidated rule changes also included a
mechanism to automatically increase the minimum salaries, but it isn’t yet
clear whether the Trump administration will follow that approach.
proposed changes would have proven difficult for some employers to comply with.
But they also caused many to examine how they classify and compensate
employees. Just because the changes are invalidated doesn’t mean employers can
focus any less on these issues. It is important to understand the employer’s
obligations and the classifications of workers.
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