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On Jan. 3, a district court in Texas denied the federal government's motion to freeze a lawsuit from 21 states and the U.S. Chamber of Commerce challenging new
overtime regulations. The new overtime rules had been blocked
Nov. 22 by preliminary injunction, a week before they were to take effect.
The federal government was requesting a hold on the states' and chamber's lawsuit until the 5th U.S. Circuit Court of Appeals ruled on the government's earlier appeal of the preliminary injunction blocking the rule. The states and chamber are seeking a motion for summary judgment and permanent injunction in their favor while the appeal proceeds.
For more overtime compliance news, tips and tools, check out the SHRM resources provided below:
The departments of Labor and Justice filed a brief Dec. 15 that said the preliminary injunction of the overtime rule was erroneous and should be reversed. Many experts predict, however, that this opposition will vanish under the Trump administration.
In granting a preliminary injunction, the district court held that the applicability of the white-collar exemptions must be determined by analysis of an employee's job duties alone, without regard to salary.
That decision contradicts rulings of the federal appeals court, including the 5th Circuit (which has jurisdiction over the district court), and the U.S. Supreme Court, lawyers for the two departments wrote.
Although the departments strenuously objected to the preliminary injunction, the Trump administration may choose to withdraw the current appeal, noted Carol Barnett, an attorney with Polsinelli in St. Joseph, Mo.
"While the outcomes of the overtime litigation could range from a 5th [U.S.] Circuit Court of Appeals reversal of the district court's preliminary injunction to the entry of a permanent injunction by the district court with appellate court approval of a permanent injunction, the other areas for action are just as intriguing, if not more so," said Alfred Robinson Jr., an attorney with Ogletree Deakins in Washington, D.C., and former acting administrator of the Wage and Hour Division. "Congress could pass legislation to delay or modify the final rule, as well as pass a resolution of disapproval under the Congressional Review Act. Also, a U.S. Department of Labor led by Secretary-designee Andrew Puzder could delay its effective date and initiate a new rulemaking to provide a more reasonable salary level."
The district court could rule on the plaintiffs'
summary judgment motion prior to a 5th Circuit decision on the appeal of the preliminary injunction.
In granting the preliminary injunction, the district court deemed it significant that the final rule's salary-level test would grant Fair Labor Standards Act (FLSA) overtime protection to those who would be exempt if the duties test alone were applied. "But that result is not unique to the update; it flows from the longstanding requirement that an employee meet
all three tests—salary basis, salary level and duties—to be subject to the EAP [executive, administrative and professional] exemption," the brief said. And the salary level test is more objective than the duties test, it added.
[SHRM members-only HR Q&A:
Exempt Salary Basis: What types of compensation can an employer include in an exempt employee's salary to meet the FLSA minimum salary requirement?]
The overtime rule's increase in the exempt salary level isn't remarkable, the brief maintained, despite protests from the business community that it doubled from $23,660 per year to $47,476 per year. In 1938, the exempt weekly salary level was three times the minimum wage for a 40-hour workweek. The overtime rule's exempt weekly salary level is 3.15 times the current minimum wage.
If the salary level test is too low, many low-wage workers who perform little EAP work and whose work is otherwise indistinguishable from their overtime-eligible colleagues are exempt, the brief stated.
Long and Short Tests
The overtime rule took into account the old two-tiered structure for assessing compliance with the salary-level and duties tests—a structure done away with in 2004.
Under this regime, employers could satisfy a "long test," which restricted the amount of time an employee could spend performing nonexempt work to 20 percent of the time on the job, or a "short test," which had no such restriction. The long test had a lower exempt salary level than the short test.
Prior to the overtime rule, the Department of Labor (DOL) increased the exempt salary level seven times: in 1940, 1949, 1958, 1963, 1970, 1975 and 2004. By 2004, the long-test salary level fell below the minimum wage an employee earned for a 40-hour week, so employers used the more lenient short test and the long test fell out of use.
The 2004 salary level scrapped the long and short tests—replacing them with just one exempt salary level that nearly tripled the last long-test salary level. The federal government noted in its brief that the $913 weekly salary level in the 2016 overtime rule is "at the low end of the historical range of short test salary levels."
In the overtime rule, the DOL declined to resurrect a quantitative cap on nonexempt work, partly because of commenters' concern about the administrative difficulties associated with tracking the hours of exempt employees.
The department instead concluded that the salary level test is "the best single test of exempt status."
As recognized by the Supreme Court, the DOL has "broad authority to define and delimit the scope of the exemption" for white-collar workers, the federal government also noted.
The FLSA does not provide merely an implicit grant of authority for the DOL to define ambiguous terms, but assigns an explicit grant of substantive rulemaking authority, the brief emphasized. The question is not whether the phrase "bona fide executive, administrative or professional capacity" requires a salary qualification, but whether it prohibits one, it added. "In the absence of any such prohibition, the FLSA entrusts matters of judgment such as this to the secretary [of Labor], not the federal courts," the brief stated.
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