$47,476 Exempt Salary Level Struck Down

Yesterday, a Texas Federal Judge invalidated the Obama era’s overtime Final Rule which attempted to raise the salary level threshold required to qualify for the Fair Labor Standards Act’s (FLSA) “white collar” exemptions to $47,476 per year.  The last year has been a rollercoaster ride for employers working to comply with the proposed doubling of the salary level and to manage labor costs.  For now, the salary basis for “white collar” exemption will remain $455 per week — or $23,660 per year.

“The department has exceeded its authority and gone too far with the final rule,” Judge Mazzant said. “Because the final rule would exclude so many employees who perform exempt duties, the department fails to carry out Congress’ unambiguous intent.”  This ruling makes permanent the preliminary injunction issued by Judge Mazzant in November 2016, just days before the Final Rule was set to take effect.  As a result of this ruling, nearly 4 million workers will remain exempt from overtime pay.

The FLSA is the federal law that governs minimum wage and overtime pay for all hours worked. Currently, “white collar” exemptions may apply where workers meet certain duties tests and are paid on a salary basis of at least $455 per week. These workers are considered exempt under the FLSA’s executive, administrative, professional, or outside sales exemptions.

The preliminary injunction issued in 2016 is currently on appeal to the Fifth Circuit.  In an appellate brief filed by the Trump Administration’s Department of Labor (DOL), the DOL represented that it would not advocate for the $47,476 per year salary basis contained in the Final Rule.  Instead, the Trump DOL stated that it will undertake further rulemaking to determine an appropriate salary level under the FLSA.  Newly appointed Secretary R. Alexander Acosta noted in his confirmation hearings that an appropriate salary basis “somewhere around $33,000” per year is more appropriate.

Consistent with the representations made in its court filing, the DOL submitted a request for information (“RFI”) on July 27, 2017 seeking public input on the overtime rule. The RFI seeks comment and information regarding whether:

  • The current salary level of $23,660 effectively identifies employees who may be exempt,
  • A different salary level would more appropriately identify such employees, and
  • Changes to the duties test are necessary.

RFI responses are intended to aid the DOL in the development of a notice of proposed rulemaking.  Written comments in response to the RFI are due by September 25, 2017.

The ride is not over. The salary basis for the “white collar” exemption is likely to increase, but not double, pursuant to this RFI and future DOL rule making process. To ensure that their employees are properly classified, employers should stay tuned.

The case is State of Nevada et al. v. U.S. Department of Labor et al., 4:16-cv-00731, in the U.S. District Court for the Eastern District of Texas.

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