Court Stops December 1 FLSA Overtime Regulations

A nationwide emergency injunction was granted to prohibit the implementation of final FLSA regulations, which doubled the current minimum annual salary level required for exemption from $23,660 to $47,476 per year effective December 1st.

On September 20, 2016, 21 states, including Michigan, filed a lawsuit against the United States Department of Labor and the Wage and Hour division, challenging the overtime regulations. Shortly thereafter, the states also filed an emergency motion seeking an injunction to delay the implementation of these new overtime regulations.

October 19, 2016, in an attempt to prevent the execution of these new regulations, the Associate Builders and Contractors, Inc. (ACB) filed an additional lawsuit. Both lawsuits were consolidated before the same federal judge in Texas and a temporary restraining order (TRO) was requested before the consolidation.

In the past, the Department of Labor studied the salaries paid to exempt employees and decided the salary would be set no higher than the 20th percentile in the lowest-wage regions, the smallest cities, the lowest wage industries, and the smallest size establishment groups. Such new regulations created a minimum salary test that excluded 40% or more of all workers in the lowest wage Census region, from the white-collar exemptions.

The rule’s automatic indexing is also considered unlawful since there’s nothing in the FLSA allowing such an authorization, which creates a situation where the majority of employees fall into the non-exempt category.

Additionally, Bonuses are counted in a way that would ignore all but quarterly bonuses – with only 10% counting toward the salary level. The lawsuit brought forth by the 21 states alleged that the federal government is deliberately exhausting the state budgets through federal policy by increasing the number of overtime eligible employees on their non-exempt employment payrolls. This practice violates the 10th Amendment.

The U.S. District Judge Amos Mazzant agreed with the 21 states that the rule is unlawful. Set to take effect December 1st, the judge stated the regulation contradicted labor laws passed by Congress by creating a de facto salary test. These salary tests determine which workers will fall under the Fair Labor Standards Act’s white-collar, also known as Executive, Administrative and Professional or EAP, exemption.

The judge stated, “Directly in conflict with Congress’s intent, the Final Rule states that white collar employees subject to the salary level test earning less than $913 per week will not qualify for the EAP exemption, and therefore be eligible for overtime, irrespective of their job duties and responsibilities.” Additionally, The U.S. District Judge Amos Mazzant admonished the Department of Labor saying, “If Congress intended the salary requirement to replace the duties test, then Congress, and not the Department, should make that change. Congress did not intend salary to categorically exclude an employee with EAP duties from the exemption.”

Now, while the lawsuits and injunction don’t kill the regulations, instead they simply delay their implementation, a court case is still pending with a summary judgment hearing scheduled. Meanwhile, the Trump administration may retract the regulations or rescind and republish regulations, still increasing the base salary amount, but following process as it’s been done in the past. Employers will need to stay up-to-date as to whether employee positions will or will not meet the duties tests, regardless of salary amounts.

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