In Nevada v. United States Department of Labor, the United States District Court for the Eastern District of Texas determined that the U.S. Department of Labor (DOL) overstepped its administrative authority in issuing Fair Labor Standards Act (FLSA) regulations relating to overtime pay. 218 F. Supp.3d 520 (E.D. Tex. 2017). DOL wrote the regulations in response to President Obama’s instruction to the Secretary of Labor to “modernize and streamline the existing overtime regulations….” The court’s decision is good news for employers: the regulations, if fully implemented, would have dramatically increased the number of employees eligible for overtime pay.
The FLSA requires employers to pay employees one and one-half times the employee’s regular rate of pay for all hours worked above forty in a given work week. However, employers do not have to pay overtime to employees who hold positions that fall within a regulatory exemption. With respect to the executive, administrative and professional exemption, prior to the regulation at issue in this case, positions were considered exempt only if an employee in the position performs specified duties and is paid a salary of at least $455 per week, or $23,660 annually.
At Obama’s prompting, the DOL revised the federal overtime regulations. Had they gone into effect, they would have drastically raised the threshold salary amount to $913 per week, or $47,476 annually. These figures would be updated automatically every three years.
The Court’s Decision
Twenty-one states and fifty-five business groups sued the DOL seeking to invalidate the final rule. The plaintiffs argued that the overtime regulations exceeded the scope of DOL’s delegated authority. The court considered whether the DOL’s interpretation was based on a permissible construction of FLSA. The court analyzed the statutory text, and the plain meaning of the words “executive,” “administrative,” “professional,” and “capacity.” Based on this analysis, the court determined that Congress intended the exemption to apply to employees who perform “executive, administrative, or professional capacity” duties.
The court found that the final rule will “effectively eliminate the duties test…” and is thereby a “salary-level only test,” which does not align with Congress’s intent. The court explained that a lower minimum salary-level “screen[s] out the obviously nonexempt employees, making an analysis of duties in such cases unnecessary.” A higher minimum salary-level “makes an employee’s duties…irrelevant if the employee’s salary falls below the new minimum.” The court believed this ignored Congress’s intention to consider employees’ duties. Based on this determination, the court held that the DOL’s final overtime rule was unlawful.
Effect of the Court’s Ruling
The court’s decision enjoins the DOL from implementing the Obama-era rule. Furthermore, the Trump administration did not advocate for the increased salary test on appeal of the lower court’s decision. Therefore, regardless of the outcome on appeal, the Obama-era overtime rule will not go into effect, at least not during the current administration. On July 26, 2017, the DOL published a Request for Information to gather public comments to aid in revising the rule.