On August 31, 2017, Judge Amos Mazzant in the Eastern District of Texas issued a final ruling invalidating the Obama Department of Labor’s increase in the minimum salary for exempt employees under the Fair Labor Standards Act. This is the same judge that issued the preliminary injunction on November 22, 2016 that prevented the rule from going into effect as scheduled on December 1, 2016. Even though the DOL appealed the preliminary injunction to the Fifth Circuit, the Court of Appeals did not stay the proceedings in the trial court while the appeal was pending. Thus, Judge Mazzant issued his final ruling before the Court of Appeals had the opportunity to weigh in on the validity of his preliminary injunction.
You may recall the Trump DOL took the surprising position on appeal that Judge Mazzant erred in issuing the preliminary injunction, and requested that it be reversed. If the DOL had succeeded it obtaining the relief it requested, the new overtime rules could have gone into effect, which would have caused all kinds of havoc. Fortunately, on September 5, after Judge Mazzant’s ruling, the Department withdrew its appeal of the preliminary injunction. At least for the moment, the uncertainty surrounding the status of the minimum salary has been settled. The fanfare with which the DOL announced the rule last year, the thousands of lawyers hours spent educating our clients about it, and the dread with which employers anticipated its effective date, ended with a relative whimper.
For now, the minimum salary an employer must pay to exempt employees remains $455 per week. But, it may not stay that way for very long. The Department of Labor recently requested comments from the public whether it should raise the minimum salary to something more than $455 per week, but less than $913 per week in the now invalid rule. As of today, the DOL has received over 138,000 comments in response to its request, so there is obviously significant interest in further changes. The comment period remains open until September 25, so you still have the chance to weigh in if you haven’t already.
All the controversy about the new overtime rule raised an important question that warrants more attention: that is, should there even be a minimum salary as part of the test for determining whether an employee is exempt from overtime? In the ruling on the preliminary injunction, Judge Mazzant questioned whether the DOL has the legal authority to establish a salary basis test. He reasoned the FLSA itself defines Executive, Administrative, and Professional exemptions only with respect to duties, and says nothing about the employee’s salary. Therefore, he ruled, Congress did not intend that the amount of an employee’s salary be a factor in determining whether the employee was exempt; only the duties are relevant. By including a salary basis test in addition to a duties test, Judge Mazzant concluded, at least preliminarily, that the DOL likely exceeded its statutory authority.
In his final ruling, Judge Mazzant again cited Congress’ intent that only duties matter. But, he backed off his preliminary ruling that the DOL lacked legal authority to use salary test at all. Instead, he concluded merely that the minimum salary in the Obama era rule was too high because it likely would have the effect in many cases of eclipsing the duties test, essentially rendering the duties irrelevant. In other words, the salary was so high that many employees who satisfied the duties test for one of the executive, administrative, or professional exemptions would still be classified as non-exempt because their salary was less than $913 per week. So, in the end, the concept of some minimum salary apparently satisfies Congress’ intent, but the amount must still pass Judge Mazzant’s (or some other judge’s) sensibilities to be valid.
Notably, the reason the Department requested the Court of Appeals to reverse Judge Mazzant’s preliminary injunction was this very issue: the DOL did not want to lose the right to establish a minimum salary as part of the test for determining who is an exempt employee. It appears Judge Mazzant read the Department’s brief and perhaps decided to back off of what seemed to be the logical conclusion of his preliminary injunction ruling. On the other hand, it appears the Department may still be open to an exemption test that does not include a minimum salary. One of the questions (No. 7) on which the DOL is seeking public comment is whether an exemption test that relies solely on duties without regard to the employee’s salary be preferable to the current test, and if so, what elements should be included in such a test.
What do you think? Would exempt employees be harmed if there was no minimum salary as part of the test for determining who is exempt from overtime? If a minimum salary is essential, what should it be, who should make the determination, and by what criteria? Is it appropriate that federal judges are the final arbiter of what is or is not an acceptable minimum salary? Hopefully the Department will be thoughtful in its considerations of these important questions. Stay tuned…