Update on FLSA

John Christopher, Manley Burke, john.christopher@manleyburke.com

As reported in the November 2016 special edition of this Newsletter, the Department of Labor’s final rule (“Final Rule”) under the Fair Labor Standards Act (“FLSA”) raising the exempt salary threshold from $23,660 to $47,476 was enjoined from enforcement immediately before its effective date. In granting the injunction on November 22, 2016, the federal district court in the State of Nevada, et al. v. Department of Labor¹ held that an issue exists as to whether the statutory description of an exempt employee –  “any employee employed in a bona fide executive, administrative, or professional capacity…as such terms are defined and delimited from time to time by regulations of the Secretary, 29 U.S.C.§ 213(a)(1) – anticipates a salary threshold at all, much less the increased threshold embodied in the Final Rule.  As presidential administrations changed from Obama to Trump, the future of the lawsuit and therefore the Final Rule was unknown.

On August 31, 2017, U.S. District Court Judge Amos Mazzant granted summary judgment against the Department of Labor in cases challenging the Overtime Final Rule. The plaintiffs successfully argued that the Final Rule increased the minimum salary threshold so high that it is no longer a plausible proxy for the job duties of an executive, administrative, or professional capacity employee.  In accepting the plaintiffs’ argument, Mazzant’s decision held that the Department of Labor’s adoption of the substantially increased salary threshhold exceeded its authority as an administrative agency of the executive branch of government. Judge Mazzant analyzed the salary threshold under the Supreme Court’s two-step standard for reviewing agency decisions set forth in Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842–43 (1984).

The first step of Chevron is to determine, applying traditional rules of statutory construction, whether Congress has directly and unambiguously spoken to the precise question at issue. Under Chevron, “[i]f the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.” Judge Mazzant turned to the Oxford Dictionary to determine whether the terms “executive”, “administrative” and “professional” had plain meanings which did not require the Department of Labor’s salary threshold elaboration. In this regard, Judge Mazzant wrote: “After reading these plain meanings in conjunction with the statute, it is clear Congress defined the EAP exemption with regard to duties.” (emphasis added), and concluded that the overtime statute is unambiguous because the plain meanings of the words in the statute indicate Congress’s intent for employees doing “bona fide executive, administrative, or professional capacity” duties to be exempt from overtime pay.

The second step in the Chevron case is whether the Department has given effect to Congress’s unambiguous intent. Here, Congress explicitly instructed the Department of Labor to “define” and “delimit” the executive, administrative and professional categories through regulations. Here, Judge Mazzant again questioned whether the Department of Labor’s Final Rule comported to the statutes plain meaning and ultimately determined that the Department’s adoption of a salary-level test that will effectively eliminate the duties test as prescribed by the overtime statute violated Congress’ unambiguous intent that the exempted categories of workers be determined based in large measure by duties. Judge Mazzant clarified that a salary measure is certainly permissible, but it cannot become the primary determinant of whether an employee falls within the exempt categories.

Following the summary judgement ruling, on October 30, 2017, the Department of Justice, on behalf of the Department of Labor, filed a notice to appeal the summary judgment decision to the U.S. Court of Appeals for the Fifth Circuit. It is understood that the Department of Justice will file a motion with the Fifth Circuit to hold the appeal in abeyance while the Department of Labor undertakes further rulemaking to determine what the salary level should be.

In essence, then, it appears as though the Department of Labor is heading toward another iteration of the exempt employee overtime regulations – presumably one that maintains a primary focus on the duties of the employee rather than his or her salary. That said, it is also likely that an increase in the salary threshold will be included. Evidence of this can be found in the Department of Labor’s official request for information issued in July of this year seeking input on alternatives to the 2016 overtime rule proposed by the former administration.²  The request for information seeks comments on whether the salary level in the Final Rule did indeed effectively identify exempt employees without regard to the duties of those employees. Further the request for information seeks comment as to whether a different salary level would better identify exempt employees and also seeks comments as to the contours of any salary level. Thus, while it is clear that the Obama administration rule is clearly no longer viable, it is equally clear that the Trump administration is planning on issuing its own overtime rules at some point.

1 State of Nevada et al. v. U.S. Department of Labor et al., Case No. 1:16-cv-00407, U.S. District Court for the Eastern District of Texas.

2 Request for Information; Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees 82 FR 34616, July 26, 2017.