The Obama Department of Labor suffered a loss in District Court in Texas. Judge Amos Mazzant of the United States District Court for the Eastern District of Texas struck down the Obama Administration’s increase in the minimum salary for exempt employees that was scheduled to be effective on December 1, 2016. Nevada v. Department of Labor, (E.D. Tex, 2017). You will recall Judge Mazzant issued an injunction on November 23, 2016 which stopped implementation of the increase in the minimum salary from $455.00 to $921.00 a week. On September 1, 2017, Judge Mazzant issued an opinion in which he found the Department of Labor had exceeded its legislative authority when it effectively changed the determination of whether a employment position was exempt from a duties test, as called for by the Fair Labor Standards Act, to a salary test. Mazzant held that that FLSA calls for a duties test not a salary test. Meaning, in determining whether an employee is exempt from overtime and can be paid a salary, the employees’ duties are more significant than their salary. Hence, the Obama DOL did not have the authority to change DOL regulations to require the minimum salary be increased for those employed in an exempt position from $455.00 to $921.00 a week.
In Convergys Corp. v. National Labor Relations Board, (5th Cir. 2017), the Fifth Circuit Court of Appeals ruled that an employer could require an employee to sign a waiver of their right to participate in or lead a class action. Initially, a Convergys employee filed a FLSA class action against the employer in federal court. Convergys filed a motion to strike the class action filed by the employee based upon the employee signing an agreement which read, “I further agree that I will pursue any claim or lawsuit relating to my employment with Convergys (or any of its subsidiaries or related entities) as an individual, and will not lead, join, or serve as a member of a class or group of persons bringing such a claim or lawsuit.” The employer and the employee eventually settled the case. However, the National Labor Relations Board (NLRB) filed a complaint against Convergys claiming they violated the protections afforded by the National Labor Relations Act by requiring the employee to sign the waiver and enforcing the waiver in the employee’s collective action suit. The Administrative Law Judge agreed with the NLRB. Convergys appealed to the Fifth Circuit Court of Appeals wherein the court found on August 11, 2017 that the waiver (which was not a part of an arbitration agreement) did not violate the NLRA.
The significance of the Fifth Circuit Court of Appeals’ Convergys’ ruling is employers can now require employees to waive their right to initiate and participate in class actions without the waiver having to be part of an arbitration agreement. This is significant as many employers don’t want to establish arbitration programs which are often expensive (the employer has to pay both its defense attorney and the arbitrator) when an employee files a claim. This ruling allows employers to avoid the risk and significant financial exposure which accompanies a class action while also avoiding establishing an arbitration agreement.
The ruling in Nevada v. Department of Labor confirms what many already knew. If the Judge Mazzant did not rule in favor of the states and business groups which brought the lawsuit, the Trump DOL was going to recraft the regulations anyway. In July, the DOL requested comments on new regulations related to exempt employee’s salary and the test. Employers should take advantage by sending comments to the DOL before the September 25, 2017 deadline. What will be interesting is whether the DOL appeals Judge Mazzant’s ruling to the Fifth Circuit Court of Appeals and then to the US Supreme Court. The only reason I can see for such an appeal is to defend the agency’s inherent power to make regulations.