Court stops FLSA overtime regulations

November 28, 2016

A Texas federal court granted a nationwide emergency injunction prohibiting the implementation of the final Fair Labor Standards Act regulations that essentially doubled the current minimum annual salary level for exemption from $23,660 to $47,476 per year effective Dec. 1.

Twenty-one states (including Michigan) filed a lawsuit against the U.S. Department of Labor (DOL) and its Wage and Hour Division challenging the overtime regulations on Sept. 20, the American Society of Employers (ASE) reports. A few weeks later, the states filed an emergency motion seeking an injunction to halt or delay the implementation of the new overtime regulations. On Oct. 19, another lawsuit was filed by Associate Builders and Contractors (ABC) and various chambers of commerce and business groups aimed at preventing the implementation of the new regulations. A temporary restraining order (TRO) was requested before the consolidation. These two lawsuits were consolidated before the same federal judge in Texas.

The focus of the states and the ABC lawsuit is that in the past the Department of labor studied the salaries actually paid to exempt employees and set the salary at no higher than the 20th percentile in the lowest-wage regions, the smallest size establishment groups, the smallest-sized cities and the lowest-wage industries. The new regulations created a minimum salary test that would exclude 40 percent or more of all salaried workers in the lowest wage Census region from the white-collar exemptions. The states’ lawsuit also alleged that by increasing the number of overtime eligible employees on non-exempt employment payrolls, the federal government is deliberately exhausting its state budgets by federal policy which violates the 10th Amendment, ASE reports.

U.S. District Judge Amos Mazzant in Sherman, Texas, agreed with 21 states and the business coalition that the rule, which was set to take effect Dec. 1, is unlawful. The judge said the regulation likely contradicted Congress-passed labor laws by creating a de facto salary test for determining which workers fall under the Fair Labor Standards Act’s so-called “white collar” (Executive, Administrative and Professional or EAP) exemption.

The injunction does not necessarily kill the regulations but delays their implementation. A court case is still pending with a summary judgement hearing scheduled next. Appeals of the trial court’s decision will also delay implementation.

Source: Small Business Association of Michigan


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