Federal District Court Invalidates The DOL's Overtime Rules

by Tonkon Torp LLP
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Tonkon Torp LLP

A federal judge in Texas issued an order on August 31, 2017, invalidating the Final Rule to the so-called "White Collar Exemptions" promulgated by the United States Department of Labor (DOL).

Under the Final Rule, the minimum salary level for exempt administrative, executive, and professional employees increased from $455 per week ($23,660 annually) to $913 per week ($47,476 annually), with mechanisms for increasing the thresholds at regular intervals. Our Tonkon Tip further explaining the requirements of the Final Rule can be found here.

The State of Nevada, and twenty other states, filed a lawsuit challenging the DOL with regard to the Final Rule. Separately, fifty business plaintiffs filed a similar action. The court in the Eastern District of Texas consolidated the cases, first issuing a preliminary injunction halting the rule from going into effect (which we summarized here), and now, invalidating it altogether.

In its ruling on the state and business plaintiffs' motion for summary judgment, the court held, in relevant part, that Congress defined the White Collar Exemptions primarily with regard to the requisite duties performed by those employees, and not their pay. Before the Final Rule, the DOL implemented a minimum "salary basis" test for identifying the "obviously" nonexempt employees, which the court conceded was consistent with Congress' intent. The court concluded that the Final Rule, however, with the significantly increased salary thresholds, would make it so that exempt status "depended predominantly on a minimum salary level, thereby supplanting an analysis of an employee's job duties." The court thus held that the DOL "has exceeded its authority and gone too far with the Final Rule."

What should employers do now? The court's decision will almost certainly be appealed, meaning that a higher court could affirm - or overturn - this District Court's ruling. Employers therefore should not assume that the DOL's Final Rule will never be implemented. Until a higher court rules otherwise, however, employers need not raise the salary level of its exempt employees, because the Texas court has enjoined enforcement of the Final Rule. Employers still must comply with the existing rules, however, including the current salary basis and duties tests.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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