New FLSA rule blocked by federal court

In an unexpected decision late yesterday, November 22, a federal court judge issued a preliminary injunction blocking implementation of the new Fair Labor Standards Act (FLSA) regulation. The new rule was to go into effect on December 1.

What does this mean for employers?

The injunction means that the DOL is prohibited from implementing the new rule on December 1. As a result, the salary level test for exempt status remains at $455 per week ($23,500 annually).

Let’s be clear: employers are not required to implement the new rule on December 1.

The court must still determine whether to issue a permanent injunction. Given the court’s discussion of the DOL’s overreach in setting the salary level, a permanent injunction seems likely.

This means that after countless hours of preparing for the new rule, employers are now left to decide whether to leave some changes in place or to go about delicately “unwinding” their plans. Maintaining the status quo for employees about to be reclassified as non-exempt is likely to meet with little resistance. Employees who faced loss of workplace flexibility and new timekeeping obligations may well be pleased with this development. While some, who were to become overtime eligible, may feel that they are missing out. Employers will also have to evaluate how to handle exempt employees who have already been notified of salary increases to meet the new higher weekly salary. These changes may prove more difficult to walk back.

Just as effective communication was key to notifying employees of the FLSA rule change, communication is also key to helping employees understand this new development and the decisions employers will make to maintain a “new normal.”

What the new FLSA rule was going to change

Under the new rule, the salary level requirement for exempt white collar status was to go from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). In September, attorneys general from 21 states and a coalition of business groups each sued the Department of Labor (DOL) to block the regulation. The groups argued that the DOL exceeded its authority when it more than doubled the salary level for exempt status. The groups also asked the court to block the DOL from implementing the rule on December 1. The case was assigned to Judge Amos Mazzant, appointed to the federal court by President Barack Obama in 2014. Many doubted that an Obama appointee would actually delay the FLSA rule that was seen by its supporters as a key DOL achievement under the Obama administration.

Judge Amos Mazzant’s surprising decision

Judge Mazzant surprised most in issuing the November 22 nationwide preliminary injunction that temporarily halts implementation of the new rule. In his opinion, Judge Mazzant noted that the “plain meaning” of the white collar exemptions depend on an “employee’s duties rather than an employee’s salary.” However, the new rule “exceeds [the DOL’s] delegated authority and ignores Congress's intent by raising the minimum salary threshold such that it supplants the duties test." Confirming what employers have been telling the DOL since it proposed the new rule, the court stated that the DOL’s “significant increase to the salary level” basically makes exempt status a “de facto salary-only test.” Reminding the DOL of its role, Judge Mazzant noted that if the salary requirement is to be the primary criteria, Congress, not the DOL, should make that decision. Because allowing the rule to go into effect would cause irreparable harm to employers, the court issued a nationwide temporary injunction blocking the DOL from implementing and enforcing the new rule.

To learn more about this FLSA development, please contact the labor and employment attorney listed below.

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