For those who missed it while getting an early start to their Labor Day weekend, late last week a federal judge closed the door on regulations that would have significantly changed overtime exemptions after previously leaving that door ajar.
Most employers became very familiar — and concerned — with the proposed regulations over the past two years. The regulations would have increased the minimum salaries required for executive, administrative and professional employees to remain exempt from overtime pay under the Fair Labor Standards Act (FLSA). We wrote about the regulations and their effects in detail here. They were set to become effective December 1, 2016, and would have more than doubled those salary minimums from $455 per week, or $23,660 annually, to $913 a week, or $47,476 annually. The regulations would also have increased the salary threshold for the “highly compensated employee” exemption from $100,000 to $134,000. However, a lawsuit was filed in the Eastern District of Texas and the judge who was assigned the case granted an emergency, nation-wide injunction in November of last year which preliminarily (and temporarily) prohibited the Department of Labor from implementing the new rules.
On Thursday of last week, that same court entered a final judgment against implementing the higher salary thresholds. In doing so, the court found Congress intended that both the salary levels and the duties of executive, administrative and professional employees be considered in determining whether they are exempt from overtime requirements of the FLSA. The court concluded that the high minimum salaries proposed by the regulations placed too much emphasis on only one factor and effectively eliminated consideration of what duties are performed by those employees. The ruling can be found here.
For all practical purposes, the court’s ruling means that the door is now shut on those higher salary thresholds. The Department of Labor has even stated in filings that it no longer seeks to increase the salary minimums to the levels called for by the regulations it fought to implement last year. Rather, the DOL seeks now only to clarify with the courts whether it has any legal authority to increase those minimums at all. When that clarification comes, the DOL may well again implement increases, though not like the ones just struck down.
Employers should keep their eyes open for requests for information and comments from the DOL in anticipation of possible increases to minimum salary thresholds in the near future. Fortunately, those increases will likely be substantially smaller than those which would have been implemented late last year. In addition, many employers, having already prepared their workforces and compensation schemes to allow for the possibility of higher minimum salaries, will likely have less cause for concern with the smaller increases to come.