Wednesday, September 20, 2017

FLSA Injunction Becomes Permanent

In November of 2016, a Texas federal district court issued a preliminary injunction which blocked the implementation of proposed amendments to the Fair Labor Standards Act’s (“FLSA”) overtime rules.  To recap, the Obama Administration had proposed changes to the overtime rules that would include raising the salary threshold for exempt employees from $23,660 to $47,476.  This change would have had a significant impact on many employers.  However, in November of 2016 U.S. District Judge Amos Mazzant issued an injunction preventing the new overtime rules from taking effect on December 1, 2016, as originally scheduled.  This meant that employers nationwide could put the overtime changes on hold.

On August 31, 2017, the hold became permanent.  Judge Mazzant’s decision invalidating the proposed changes to the overtime rules stressed that when Congress enacted the so called “white collar” exemptions of the FLSA it made it very clear that an employee’s job duties should determine whether or not the overtime exemption should apply.  The new salary threshold test would make the intent of Congress meaningless.  Specifically, the court explained that:
This significant increase would essentially make an employee’s duties, functions, or tasks irrelevant if the employee’s salary falls below the new minimum salary level.  As a result, entire categories of previously exempt employees who perform “bona fide executive, administrative, or professional capacity” duties would now qualify for…exemption based on salary alone…This is not what Congress intended.
In short, Judge Mazzant makes it clear that a rule change which eliminates the importance of the “duties” test is inconsistent with the intent of the FLSA’s overtime exemptions.  The Department of Labor (“DOL”) could appeal Judge Mazzant’s decision, but most think this is unlikely.  

So now the question becomes, what will happen next?  There is speculation that the Trump Administration may propose its own changes to the salary threshold test.  The thought is that the salary threshold may be increased to an amount between $35,000 and $38,000.  Such a change would not render moot the “duties” test for exempt employees, but would raise the threshold salary to an amount that is more reasonable for an exempt employee.

The Department of Labor “DOL”) has recently issued a request for information (“RFI”) asking the public for input to help guide it in the creation of new overtime rules.  Specifically, the DOL is seeking comment on several issues including, whether the current salary levels effectively identify exempt employees, whether a different salary level would more effectively identify exempt employees and whether changes to the duties test are necessary.  Comments are due by September 25, 2017.

For now, employers do not have to make any changes.  However, it is prudent to continue to review job descriptions to insure that exempt employees truly perform exempt duties.  It is also advisable to take a critical look at salaries and make sure that they are commensurate with the job market in which the employer operates.  If the threshold amount were to increase between $35,000 and $38,000 as some speculate it will, chances are slim that most exempt employees are not already earning salaries within this range.  As always, if you have any questions regarding FLSA exemptions, please feel free to contact the Ancel Glink labor and employment group.