Employment & Labor Law

The U.S. Department of Labor’s new rule increasing the minimum salary for overtime exempt employees that was scheduled to go into effect December 1, 2016 has been put on hold by a federal district court judge in Texas. A temporary injunction blocking this new salary minimum rule from going into effect was issued in the case of Nevada v. U.S. Dept. of Labor, C.A. No. 4:16-CV-00731 (E.D.Tex. October 22, 2016).

The Court’s Decision

In issuing the temporary injunction, the judge reasoned that the apparent intent of Congress in setting up the overtime exemption categories (mainly the executive, professional, and administrative position exemptions) was to create job duties requirements to determine who can be treated by employers as exempt from overtime. The judge interpreted the law creating the overtime pay requirement – the federal Fair Labor Standards Act – as not indicating or intending limits on the amount of pay that must be given to someone whose job duties fall within one of these overtime exempt categories. This ruling is surprising given that we have had salary minimum requirements for well over fifty years, with intermittent increases in the minimums throughout this time, and they have never before been invalidated as exceeding the scope of the Department of Labor’s authority under the statute.

Effect on Employers

This ruling means that, for the time being, the new salary levels are on hold and will not be effective until the judge involved in this case, or an appellate court, removes the injunction (or Congress acts to confirm the increased minimum, which is not likely). So, employers are not required to raise anyone’s salary by December 1, 2016 in order to treat them as exempt from overtime pay. While the basis of the court’s decision raises the question of whether the present minimum salary level of $455/week ($23,660/year) is even valid, the court’s injunction only puts on hold the new rule that was going to increase the minimum salary required for exempt employees to $913/week ($47,476/year) starting December 1.

This court ruling raises questions about what employers who have already announced salary increases in response to the Department of Labor’s rule increasing the minimum salary should do. The simple answer is that they can retract these increases, if they wish. A suggestion is to put the increases on hold while this issue continues through the courts, as the current decision is temporary. Similarly, employers who have informed employees that they will be converted to receive overtime pay rather than raising their salary in response to the planned Department of Labor increase can retract this change and keep these individuals exempt from overtime pay (provided their salary is at least $455/week ($23,660/year), at least pending final court action.