School districts and other employers have likely been busy preparing to ensure compliance with the Department of Labor’s new overtime rules under the Fair Labor Standards Act (“FLSA”). But just over a week before the new rules were scheduled to take effect, they came to a screeching halt when a Texas federal district court granted a preliminary injunction stopping their implementation.
The FLSA requires employers to pay nonexempt employees the federal minimum wage and overtime pay (1.5 times the regular rate of pay) for all hours worked over 40 hours in a workweek. To be exempt from these requirements, employees must be paid a salary of at least $455 per week ($23,660 per year). Exempt employees must also fall under one of the exempt duties categories: either executive, administrative, or professional. Teachers are exempt without meeting the salary requirement.
Under the Department’s new regulations, the duty classifications would remain the same, but the salary threshold would increase to $913 per week, or $47,476 per year. The regulations also establish a formula by which the salary threshold would automatically increase every three years. Non-teacher employees making less than that amount would no longer be exempt. Districts would have the option to either raise these employees’ salaries to meet the new minimum, or to begin tracking their hours and paying any applicable overtime. These changes were scheduled to be effective starting December 1, 2016.
Several states and businesses filed suit challenging the Department’s Final Rule, and brought a motion for preliminary injunctive relief to prevent the new rule from going into effect during the pendency of the case. On November 22, 2016, the United States District Court for the Eastern District of Texas granted the injunction. The court agreed with the plaintiffs that the Department exceeded the authority delegated to it by Congress through the FLSA. The language of the statute, the court reasoned, does not specifically set any salary requirements, but applies to “any employee employed in a bona fide executive, administrative, or professional capacity.” Although the statute authorizes the Department to define the duties that qualify within those classifications, the court found that nothing in the statutory language indicates that Congress intended the Department to establish a minimum salary level. The court noted that the existing salary level was purposefully set low to “screen out the obviously nonexempt employees,” but that the significant increase “creates essentially a de facto salary-only test,” contrary to the statutory text and Congress’s intent.
The court applied its injunction nationwide, meaning that the Department is enjoined from enforcing the new rules across the board. Thus, for the time being, the existing rules and the longstanding $23,660 salary threshold remain in effect. As a preliminary injunction, this is not a final decision on the legality of the regulations, and the Department may appeal. However, given the impending change in the presidential administration, it is possible that any potential appeal might be withdrawn, and the Department may decide not to pursue the new regulations at all. In the meantime, districts are free to maintain the status quo with respect to exempt job classifications.
This article is intended to provide general information with commentary. It should not be relied upon as legal advice. If required, legal advice regarding this topic should be obtained from district legal counsel. •
This article is intended to provide general information with commentary. It should not be relied upon as legal advice. If required, legal advice regarding this topic should be obtained from district legal counsel.
Adam Wattenbarger is an education law attorney with the law firm of Kennedy & Graven, Chartered. For more information, please contact him at (612) 337-9306 or http://www.kennedy-graven.com.
© Adam C. Wattenbarger (2016). Used by permission.