DOL SALARY INCREASE ENJOINED BY U.S. DISTRICT COURT IN SHERMAN
In a clear upset, Federal Judge Amos Mazzant of the United States District Court for the Eastern District of Texas issued an opinion today granting the State of Nevada and multiple other states’ emergency motion seeking a preliminary injunction preventing the Department of Labor’s increase in the salary threshold for the executive, professional, administrative exemptions to overtime compensation. This ruling is clearly an upset as the lawsuit filed by the states and the chambers of commerce was seen as a long shot by most of the legal community. What this ruling means is that employers will not be required to increase exempt employees’ (managers, sales professionals, etc) salary from $455.00 a week to $921.00 a week on December 1, 2016 in order for the employee to still fall within the applicable exemption to payment of overtime.
Judge Mazzant concluded that Fair Labor Standards Act (FLSA) (enacted by Congress in 1938) did not give the Department of Labor (DOL) authority to raise the salary threshold to $921.00 a week for the reason that it turned the exemption into a salary test rather than a duties test. In short, Judge Mazzant ruled the increase changed the exemption from a determination of the employees’ duty to more of a determination of the employee’s salary. He found the language in the FLSA did not give the DOL the authority to essentially change the exemption from a duties test to a salary test. Understand, this is a preliminary injunction applicable nationwide. While the injunction was issued in response to the State of Nevada’s lawsuit, the language in the court’s order enjoined the DOL from implementing and enforcing the regulations which increased the salary threshold to $921.00 a week. Meaning, the prior regulation of $455.00 a week remains the law. The injunction was NOT LIMITED to just state governments but was enjoining the DOL from implementing and enforcing the salary increase enacted in the Federal Register in May 2016.
Now, understand, this is prelimiary injunction. At some point, there will be hearing on the merits before this same court and Judge Mazzant may reverse course. Additionally, the DOL may appeal Judge Mazzant’s preliminary injunction to the the 5th Circuit Court of Appeals.
What does this mean going forward? Given the legislation that was proposed this fall by Republicans in the House and Senate which sought to address the DOL’s action in raising the salary threshold, I would expect that the salary threshold for the exemptions will be increased gradually over the course of several years. Meaning it is my belief that employers can anticipate an increase in the salary threshold sometime over the next 3 years.