On Friday, a federal court in Texas ruled that the U.S. Department of Labor exceeded its authority in creating a new regulation, which increases salary limits so significantly that it eliminates the job duties test required under the Fair Labor Standards Act ("FLSA") for employees to be correctly classified as exempt from overtime pay. As this case, State of Texas v. United States Department of Labor, was brought by the state of Texas as an employer and not on behalf of other employers, the Eastern District of Texas, Sherman Division, only issued a preliminary injunction preventing the DOL from applying this new rule, which goes into effect nationally on July 1, against the state of Texas as an employer. But ... that is not the end of this issue.
This same Texas federal court has other cases pending before it by other employers, and this week the US Supreme Court issued a landmark decision that will likely make it much easier for this court and others (more lawsuits will likely be filed) to enjoin this rule from going into effect and/or prompt the DOL to lower the new salary increases to a more moderate level or delay the start date of enforcement.
In Loper Bright Enterprises v. Raimondo, the Supreme Court has overruled the Chevron standard, which for many years gave administrative agencies like the DOL and Equal Employment Opportunity Commission very broad power to interpret vague federal statutes and had courts deferring to an agency's interpretation of such a statute. Thousands of cases have relied on that standard for interpreting administrative agencies' interpretations of vague federal statutes. Now the Supreme Court has held that courts are the ones who have the power to interpret these ambiguous statutes and most importantly to decide whether an agency's interpretation is wrong without deferring to an agency's expertise.
As explained in my article on June 27, https://friedgrodinlaw.com/dont-rush-to-the-beach-before-you-hear-whether-salaries-for-exempt-employees-are-going-up-july-1/ DOL is poised to implement a new regulation July 1 that will significantly increase the minimum weekly salary an exempt employees must earn to be qualified as exempt from overtime pay. The new regulation is the DOL's interpretation of the standard for exempt status under the FLSA, which merely says that an employee's exempt status is based on meeting the job duties test of an executive administrative or professional employee. The statute has no requirement for salary to be part of the analysis but the DOL, which is authorized under the FLSA to define and delimit this part of the statute, has long held that exempt status includes both a minimum salary test and a job duties test. In implementing salary rates that will increase significantly on scheduled dates, the ED of Texas, relying on the Supreme Court's decision in Loper Bright, said the DOL went way too far in defining and delimiting what the exempt status part of the FLSA means.
Given the ED of Texas decision, State of Texas v. United States Department of Labor, and the Supreme Court's decision, it is quite likely we will see more federal courts issuing injunctions freeing up other Texas employers and potentially all employers across the country from having to follow these new salary requirements.
But... For now, until a court holds that the DOL's new salary rates for exempt employees is enjoined nationally or the DOL delays the start date, employers across the rest of the country must comply with it starting Monday. Stay tuned.
