United States: Federal Court Strikes Down Department Of Labor's Overtime Rule

On August 31, 2017, Judge Amos Mazzant in the United States District Court for the Eastern District of Texas issued an order granting a group of twenty-one states' and fifty-five business associations' motion for summary judgment in consolidated cases seeking declaratory and injunctive relief against a May 23, 2016 Department of Labor rule drastically increasing the minimum salary an employee must earn to qualify for the most common exemptions from the federal overtime laws. The rule was originally scheduled to go into effect on December 1, 2016 and would have increased the minimum salary an employee must earn to qualify for the administrative, executive or professional exemption from federal overtime requirements from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). The rule also would have provided for automatic increases to the minimum salary level every three years. Judge Mazzant had issued a nationwide preliminary injunction on November 22, 2016 delaying implementation of the Department of Labor's new minimum salary rule, finding that it was likely unlawful and would cause irreparable harm to the plaintiff states and business groups. Judge Mazzant's August 31, 2017 order confirms the findings in the November 22, 2016 preliminary injunction and represents a final decision at the district court level that the Department of Labor's May 23, 2016 minimum salary rule is illegal and void.

Judge Mazzant specifically held that the new minimum salary rule was unlawful because it exceeded the Department of Labor's delegated authority under the federal Fair Labor Standards Act (the "FLSA"). The FLSA exempts "any employee employed in a bona fide executive, administrative, or professional capacity" from the general requirement to pay overtime, and authorizes the Department of Labor to promulgate regulations to "define and delimit" these exemptions. Because the statutory language creating the exemptions only describes types of job duties and does not have any minimum salary requirement, the court found that more than doubling the existing minimum salary by administrative rule effectively supplanted the FLSA's focus on job duties and therefore conflicted with the plain and unambiguous language of the statute. The court held in the alternative that even if the FLSA were ambiguous, the Department of Labor's drastic minimum salary increase is invalid because it reflects an unreasonable interpretation of the language creating the executive, administrative, and professional exemptions. The court further agreed that the plaintiff business groups had standing to sue and that the dispute was ripe for adjudication.

Notably, the court did not hold that the preexisting minimum salary or the requirement to pay exempt employees on a salary basis is unlawful. The court recognized that prior Fifth Circuit precedent (which binds all federal courts in Texas) permits the Department of Labor to establish a minimum salary for the executive, administrative, and professional exemptions and that a modest minimum salary can serve the purpose of "screen[ing] out obviously nonexempt employees, making an analysis of duties...unnecessary." The court held that "[t]he 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 capacity duties," but the Department of Labor's new rule is such a "significant increase" that it "would essentially make an employee's duties, functions, or tasks irrelevant if the employee's salary falls below the new minimum salary level." The court was concerned that such a large increase would make about 4.2 million formerly exempt employees "automatically...eligible [for overtime] without a change to their duties."

The court also did not decide whether a smaller increase in the minimum salary requirement would be lawful. The court suggested that increases merely tracking inflation would pass muster, but all that the court formally held was that an increase to $913 per week goes too far.

Judge Mazzant's order was not a complete win for the plaintiffs though. The court rejected the plaintiff states' arguments that the FLSA cannot constitutionally apply to state employers and that the FLSA does not contain a required "clear statement" that it applies to the states. These arguments were foreclosed by a directly on point Supreme Court case upholding the FLSA's constitutionality as applied to the states and the clear language of the statute making it applicable to the "activity of a public agency," defined as "the government of a State or political subdivision thereof." Finally, the court did not reach whether the automatic increase provisions of the Department of Labor's rule violated the Administrative Procedures Act, because it was unnecessary to answer this question in light of the court's invalidation of the rule's initial minimum salary increase.

Judge Mazzant's decision is very significant for employers because it has nationwide effect.  If the Department of Labor's rule had not been declared invalid, it would have required the reclassification of about 4.2 million exempt employees or an increase in salary level that is double the current minimum. The Department of Labor is entitled to appeal the decision to the Fifth Circuit Court of Appeals, but may choose to forgo an appeal in light of the fact that the rule at issue was promulgated by the Obama Administration and President Trump's Secretary of Labor has already begun efforts to formulate a new rule. The Department of Labor had previously appealed the November 22, 2016 preliminary injunction and filed its final brief on June 30, 2017, but the Fifth Circuit ordered the appeal dismissed as moot on September 7, 2017 at the Department of Labor's request. The Texas AFL-CIO attempted to intervene in the case and was rejected, but the union might appeal the denial of leave to intervene and try to defend the Department of Labor rule at the appellate level if the Department of Labor abandons the case.

The case in which Judge Mazzant invalidated the Department of Labor's new minimum salary Rule is State of Nevada, et al. v. United States Department of Labor, et al., Case # 4:16-cv-00731-ALM, which was consolidated with Plano Chamber of Commerce, et al. v. Perez, et al., Case # 4:16-cv-00732-ALM.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
15 Aug 2017, Seminar, Los Angeles, United States

August 15, 2017 - Pasadena Area
DoubleTree by Hilton Hotel - Monrovia

August 23, 2017 - Orange County
Embassy Suites Anaheim Garden Grove

September 19 - Los Angeles
Sheraton Gateway Hotel - LAX

October 4, 2017 - San Francisco
DoubleTree by Hilton Hotel - SFO

28 Sep 2017, Seminar, Washington, DC, United States

The Theater of Operations, the Enemy, their Tactics, and You: Your Plan of Defense, Your Obligations, Your Risks and Your Liabilities.

3 Oct 2017, Seminar, California, United States

You've taken all the recommended cybersecurity actions. You have secured ITAR areas. And you welcome tours by potential global customers and suppliers to show off your unique capabilities. Did you know that you could be losing valuable IP just by granting permission to "may I touch"?

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.