Wage/Hour Alert: Court Issues Nationwide Block of Overtime Exemption Regulations

At the request of 20 states, the federal District Court in Texas has issued a nationwide preliminary injunction blocking the U.S. Department of Labor’s rule increasing the minimum salary threshold for the “white collar” exemptions to overtime under the Fair Labor Standards Act (“FLSA”).  The Department of Labor rule requires that effective December 1, the minimum salary level for the exemption to apply would be increased from $455 per week ($23,660 per year) to $912 per week ($47,892 per year), and then automatically thereafter.   Our May 18, 2016 blog addressed this rule.

In State of Nevada, et al. v. U.S. Department of Labor, et al. (4:16-CV-00731), the United States District Court for the Eastern District of Texas, concluded that the states had demonstrated a likelihood of success on the merits of the lawsuit, and that a failure to preliminarily block the rule would cause irreparable harm to the states (and, presumably, private employers).  The court credited the states’ arguments that the Department of Labor exceeded its authority in increasing the minimum salary threshold, because it disregarded the requirements of the “duties” test under the FLSA.  The court also took issue with the Department of Labor’s automatic updating mechanism to increase the minimum salary threshold, because it does not require public notice and comment.  The updating mechanism was intended to ensure that the minimum salary level would be linked to the 40th percentile of weekly earnings of full-time salaried employers in the country’s lowest wage region.

The court’s decision comes at a time when most employers have already addressed the increase in salary thresholds that were originally set to take effect in a few days.  Nevertheless, the future viability of the Department of Labor rule, particularly the automatic updating mechanism, remains in question.