By Brian Culnan
On May 23, 2016, the United States Department of Labor published the final version of a rule that would significantly alter the “white collar” or “EAP” (executive/administrative/professional) exemption to the Fair Labor Standards Act’s overtime requirements. Scheduled to become effective on December 1, 2016, the rule would have, among other things, required an employee to be paid $47,892 (or $921 per week), up from the current $23,660 (or $455 per week), to qualify for the EAP exemption. The Department of Labor estimated that 4.2 million workers currently ineligible for overtime, and who fall below the minimum salary level, would have automatically become eligible for overtime under the rule without a change to their duties.
In September 2016, Nevada and 20 other states challenged the legality of the rule, and on October 12, 2016, they moved for emergency preliminary injunctive relief, seeking a delay in the implementation of the rule. On November 22, 2016, United States District Court Judge Amos L. Mizzant III of the Eastern District of Texas issued a preliminary injunction in State of Nevada v. United States Department of Labor, stopping the rule from going into effect.
In granting the state plaintiffs’ request for an injunction, Judge Mizzant noted that, when Congress enacted the EAP exemption to apply to employees doing actual executive, administrative or professional duties, it defined the exemption with respect to duties rather than a minimum salary level. Indeed, he noted that, while the Department of Labor has “significant leeway to establish the types of duties that might qualify an employee for the exemption, nothing in the EAP exemption test indicates that Congress intended the Department to define and delimit with respect to a minimum salary level.” In light of the “significant increase to the salary level,” Judge Mizzant ruled that the Department of Labor had effectively created a “de facto salary-only test.” In his view, “[i]f Congress had intended the salary requirement to supplant the duties test, then Congress and not the Department, should make that change.”
Seeking to prevent “both employees and employers from being subject to different EAP exemptions based on location,” the Court issued a nationwide injunction halting the Department of Labor’s implementation of the overtime rule. While the decision has been hailed by the state plaintiffs and business organizations such as the Chamber of Commerce, individual businesses may now face the difficult position of having already taken worker-friendly steps to pro-actively comply with regulations that now, especially with the transition to a Trump administration that will probably be disinclined to defend or reissue the rule, may never be implemented.
As overtime rule updates occur, Iseman, Cunningham, Riester & Hyde will share them with impacted clients via its website and LinkedIn page.