Proposed 2016 “White Collar” Regulations Struck Down; DOL Starts Work on New Regulations

The winding legal path of the 2016 “white collar” regulations has come to an end.  On August 31, 2017, the Honorable Amos L. Mazzant of the U.S. District Court for the Eastern District of Texas struck down the U.S. Department of Labor’s (“DOL”) regulation that would have, among other things, doubled the minimum salary requirements for workers classified as exempt from overtime under the FLSA’s executive, administrative, and professional exemptions.  The court held that the DOL overstepped its rulemaking authority by increasing the salary threshold to a point that rendered employees’ duties irrelevant.

As widely reported and commented upon (including here), the new regulations were to have gone into effect on December 1, 2016.  However, a group of states and business groups challenged the rules in federal court, asserting that the DOL exceeded its rulemaking authority and that only Congress had the authority to so greatly change the regulations.  To the surprise of many, the federal court agreed, and issued a preliminary injunction that prevented the regulations from taking effect.  The DOL, under the President Obama administration, appealed the preliminary injunction to the United States Court of Appeals for the Fifth Circuit.  However, following the election of President Trump, the DOL changed course, ultimately informing the Court of Appeals that the DOL would not advocate for the higher salary level, but instead intended to undertake further rulemaking to determine the appropriate salary level.

While that appeal remained pending, the lower court issued its final decision on August 31, granting summary judgment to the states and groups, and striking down the new regulations.  The court based its holding on the fact that Congress defined the FLSA’s executive, administrative, and professional exemptions with a focus on employees’ duties.   As a result, the DOL’s “authority is limited to determining the essential qualities of, precise signification of, or marking the limits of those bona fide executive, administrative, or professional capacity  employees who perform exempt duties and should be exempt from overtime pay.”  For this reason, the court held that the DOL “does not have the authority to use a salary-level test that will effectively eliminate the duties test.”  The court clarified that the DOL “has the authority to implement a salary-level test,” but the rule’s “significant [salary] increase would essentially make an employee’s duties, functions, or tasks irrelevant if the employee’s salary falls below the new minimum salary level.” 

Following the court’s decision, on September 5, 2017, the DOL filed an unopposed motion with the Fifth Circuit Court of Appeals asking it to dismiss its appeal of Judge Mazzant's preliminary injunction order invalidating the overtime rule, given that the lower court's new summary judgment decision rendered the preliminary injunction moot.  The Fifth Circuit granted the DOL’s motion and dismissed the appeal on September 7, 2017.  This leaves Judge Mazzant’s order striking down the regulations as the final legal word on the 2016 regulations.

However, that is not end of the story.  The DOL is committed to updating the white collar exemptions, and new regulations are in process.  This past summer, on July 26, 2017, the DOL issued started the rulemaking process anew with a request for information soliciting public comments on the overtime exemptions for certain executive, administrative, professional, outside sales, and computer employees.  The DOL’s Request for Information specifically acknowledges stakeholders’ concerns that “the new salary level [proposed in the 2016 regulations] inappropriately excludes from exemption too many workers who pass the standard duties test” and “would adversely impact low-wage regions and industries.”  The DOL hopes to receive comments regarding “whether the standard salary level set in [the final] rule effectively identifies employees who may be exempt, whether a different salary level would more appropriately identify such employees, the basis for setting a different salary level, and why a different salary level would be more appropriate or effective.”  The comment period closes September 25, 2017, and those interested in commenting can find the Request for Information in the Federal Register.

By:  John E. Pueschel and Patricia I. Heyen