Federal Judge Rejects U.S. Department of Labor's New Regulation to Expand Employee Eligibility for Overtime Pay

Employers throughout the country had a little extra to be thankful for this past Thanksgiving.  On Tuesday, a federal district court issued a nationwide injunction preventing the U.S. Department of Labor (the "DOL") from implementing a new federal regulation designed to expand the number of employees eligible for overtime pay under the Fair Labor Standards Act.

The FLSA requires employers to pay employees the federal minimum wage and overtime pay, i.e., one and one-half the employee's regular rate of pay for hours worked in excess of 40 hours per week.  The FLSA does not apply to all employees.   Those engaged in a "bona fide executive, administrative, or professional capacity" are specifically exempt from both minimum wage and overtime pay requirements under the FLSA. 

The FLSA does not define "bona fide executive, administrative, or professional capacity."  Instead, Congress delegated to the DOL authority to issue regulations defining these terms.  For decades, the DOL has issued various regulations setting forth tests and standards to determine whether an employee falls within the "executive, administrative, or professional" exemption.  Under current DOL regulations, an employee must earn at least $455 per week ($23,660/year) to qualify under the "executive, administrative, or professional" exemption. 

On May 23, 2016, the DOL issued a new rule more than doubling the minimum salary requirement from $455 per week ($23,660/year) to $921 per week ($47,892).  As a consequence, a substantial percentage of the workforce would no longer satisfy the "executive, administrative, or professional" exemption, and therefore, employers would be required to pay overtime to the newly reclassified employees.

The State of Nevada and twenty-one other states filed a lawsuit against the DOL in Texas federal court challenging the regulation, and requesting an injunction prohibiting the DOL from implementing or enforcing the regulation.  On November 22, 2016, just 9 days before the regulation was scheduled to go into effect, U.S. District Court Judge Amos L. Mazzant granted their emergency motion for a preliminary injunction, and enjoined the DOL from implementing and enforcing the new regulation. State of Nevada v. United States Department of Labor, et al., No. 16-cv-00731.  Attached is a copy of Judge Mazzant's Memorandum Opinion and Order. 

While the decision is not a final judgment or a conclusive disposition of the litigation, the ruling will undoubtedly delay the implementation of the DOL's minimum salary increase regulation.  Whether the regulation ultimately survives will likely be decided by a federal court of appeals or the Trump administration. 

Questions regarding the Fair Labor Standards Act or other employment-related issues, can be directed to Matt Tyrrell at (312) 648-2300 or matthew.tyrrell@sfnr.com