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U.S. District Court Invalidates Pending FLSA Rules

A federal district court in Texas last week invalidated the U.S. Department of Labor's (DOL) pending overtime regulations—finalized under the Obama Administration—aimed at increasing the salary threshold for overtime exemptions under the Fair Labor Standards Act (FLSA). The court's opinion follows its decision last November to preliminarily enjoin the rules from being implemented.

The court's August 31 ruling, on a summary judgment motion filed by the same business groups and states that had requested the injunction, mainly serves as a prelude to the pending appeal of the injunction and the Trump Administration's likely revision of the regulations.

Had the rules gone into effect as planned, the salary threshold for white-collar employees to qualify for the FLSA's overtime exemption would have increased from $455 per week ($23,660 annually) to $913 per week ($47,476 annually), and the salary threshold would have increased every three years. The court determined that such dramatic changes exceeded the DOL's authority to enforce the FLSA. It reasoned that Section 213 of the FLSA, which establishes the overtime exemption for any individual employed in a bona fide executive, administrative, or professional capacity, specifically entrusts the Secretary of Labor to define those terms based on the duties of the employees, not their salaries. According to the district court, the FLSA permits the DOL to impose a minimum salary-based test as a way to identify employees who may qualify for a duties-based analysis, but, by increasing the salary threshold by so much, the DOL effectively replaced the duties test with a predominantly salary-based standard that is not endorsed by the statute.

The Obama-era DOL immediately appealed the court's November preliminary injunction order to the U.S. Court of Appeals for the Fifth Circuit. The DOL—now led by Trump-appointee Alexander Acosta—has since announced its plan to review and revise the new rules, and has asked the Fifth Circuit to rule only on the issue of whether the DOL has the authority to set a salary threshold at all—an issue called into question by the district court's injunction ruling.

While this opinion may have limited practical impact, it previews the arguments that the Fifth Circuit will consider in reviewing the earlier injunction. It also may guide the DOL in revising the rules to determine how far it may go to increase the salary threshold of the overtime exemptions without exceeding its statutory authority.

Copyright © by Ballard Spahr LLP

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Daniel Johns, Ballard Spahr Law Firm, Philadelphia, Labor and Employment Attorney
Partner

Daniel V. Johns is the Leader of Ballard Spahr's Higher Education Group and is a member of the firm's Labor and Employment Group. Mr. Johns represents and advises employers and management in a variety of labor and employment issues, including discrimination, harassment, and other civil rights litigation; interest and grievance arbitrations; at-will litigation; restrictive covenant/trade secret claims; benefits litigation; independent contractor classification issues; collective bargaining; union avoidance; and unfair labor practice litigation before the National Labor...

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Kelley Kindig, Ballard Spahr Law Firm, Labor and Employment Litigation Attorney
Of Counsel

Kelly T. Kindig represents public and private employers in a broad range of employment litigation and counseling and labor matters. She helps clients develop employment policies relating to personnel and employment law issues and advises clients regarding compliance with various employment and labor laws, including Title VII, FMLA, FLSA, ADA, NLRA, and LMRA.

Ms. Kindig also counsels on hiring, firing, and disciplinary practices, as well as restrictive covenant matters. She is experienced with collective action litigation under the FLSA and ADEA and defends employers in employment litigation, including race, sex, and age discrimination, and sexual harassment lawsuits. Ms. Kindig represents employers in collective bargaining negotiations and labor arbitrations, as well as unfair labor practice charges and representation petitions filed with federal and state administrative agencies.

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Christopher Cognato, Ballard Spahr Law Firm, Philadelphia, Labor and Employment Litigation Attorney
Associate

Christopher T. Cognato advises public and private employers on a range of labor and employment issues and represents them in litigation and administrative proceedings. His experience includes cases brought under Title VII of the Civil Rights Act, the Employee Retirement Income Security Act (ERISA), the Americans with Disabilities Act (ADA), Family and Medical Leave Act (FMLA), Fair Labor Standards Act (FLSA), Pennsylvania Human Rights Act, and National Labor Relations Act. He frequently helps clients develop employment policies, including those related to hiring, firing...

215-864-8612