Category Archives: Wage-Hour — Fair Labor Standards Act (FLSA) and Colorado Wage Order

September 12, 2017

Employer May Keep Tips As Long As Employees Are Paid Minimum Wage, According To 10th Circuit

By Brad Cave

By invalidating a U.S. Department of Labor (DOL) regulation that states that tips are the property of employees, the 10th Circuit Court of Appeals (whose opinions apply to Wyoming, Colorado, Utah, Kansas, Oklahoma, and New Mexico) rejected an employee’s wage claim based on her employer’s practice of keeping all tips. But employers in states with an analogous state law governing ownership of tips, such as Wyoming, need to be aware that the 10th Circuit’s ruling may not change how they handle tips.

Caterer Kept Tips But Paid More Than Minimum Wage

Relish Catering regularly receives tips from its customers in the form of a gratuity added to their final catering bill at the end of an event. Relish retains those tips for itself rather than passing them along to its employees who work at the events. However, it pays its employees at or above the federal minimum wage of $7.25 per hour as well as time and a half for overtime and does not rely on any sort of tip credit to meet the minimum wage.

Bridgette Marlow believed Relish was required to turn over her share of the catering tips under the Fair Labor Standards Act (FLSA). Despite making $12 per hour (and $18 per hour for overtime), she sued Relish and Brett Tucker, a manager and part owner of the company, alleging they violated the minimum wage provisions of the FLSA by retaining the tips.

FLSA Restrictions Apply Only When Tip Credit Taken

Marlow argued that by retaining all of the tips, Relish was essentially paying employees below minimum wage. For example, she suggested that if she received her $12 hourly wage but Relish retained $11 in tips for each hour she worked, the result was the same as if Relish turned over all of the tips to her and paid her a $1 hourly wage. In essence, she argued that the company could be paying less than the required amount for tipped employees.

The 10th Circuit didn’t bite on Marlow’s rationale. The Court stated that it doesn’t matter where the money to pay wages comes from so long as the company paid at least the minimum wage required under the FLSA. The Court rejected Marlow’s argument that the FLSA’s tip-credit provision applied to her case because Relish doesn’t take a tip credit.

The FLSA tip-credit provision allows employers of “tipped employees” to pay a reduced hourly wage of $2.13 per hour so long as employees receive sufficient tips to raise their earnings to the $7.25 hourly minimum. But this provision applies only if the employer counts tips toward the minimum wage, said the Court. The tip-credit provision does not apply if the employer doesn’t count tips toward the minimum and instead pays the full hourly minimum wage.

The Court stated that the FLSA tip-credit provision does not require that employers turn over all tips to employee in all circumstances, as Marlow urged. Instead, when an employer doesn’t take the tip credit, the tip-credit provision imposes no restrictions on what it may do with tips as long as it pays an hourly wage above the $7.25.

DOL’s Tip-Ownership Regulation Invalid

Marlow relied extensively on a 2011 DOL regulation that provides:

Tips are the property of the employee whether or not the employer has

taken a tip credit under section 3(m) of the FLSA. The employer is

prohibited from using an employee’s tips, whether or not it has taken a tip

credit, for any reason other than that which is statutorily permitted in

section 3(m): As a credit against its minimum wage obligations to the

employee, or in furtherance of a valid tip pool.

From the language of that regulation, it would seem that Marlow had a valid claim. But the 10th Circuit said not so fast and looked at whether the DOL had the authority to implement the regulation in the first place.

Relying on U.S. Supreme Court precedent, the 10th Circuit pointed out that federal agencies may create rules only to fill “ambiguities” or “gaps” in statutes. In a “friend-of-the-court” brief, the federal government argued that the FLSA is silent on the issue of who “owns” tips when an employer does not take the tip credit, and therefore, the DOL had the authority to create a tip ownership rule to fill in that gap.

Despite the Ninth Circuit’s acceptance of that argument, the 10th Circuit disagreed with it, finding that nothing in the FLSA directs the DOL to regulate the ownership of tips when the employer doesn’t take the tip credit. Because the FLSA limits the tip restrictions to employers who take the tip credit, the DOL lacked the authority to regulate otherwise.

The Court invalidated the DOL’s tip-ownership regulation, finding it was beyond the DOL’s authority, and affirmed the lower court’s judgment in favor of the employer. Marlow v. The New Food Guy, Inc., No. 16-1134 (10th Cir. June 30, 2017). Read more >>

August 31, 2017

Court Invalidates Overtime Rule That Increased Exempt Salary Levels

By Mark Wiletsky 

The Department of Labor (DOL) exceeded its authority when it doubled the minimum salary levels for exempt executive, professional, and administrative employees under the Fair Labor Standards Act (FLSA), ruled federal judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas today. Granting summary judgment in favor of the states and business plaintiffs who challenged the new overtime rule last November, Judge Mazzant determined that the DOL’s new overtime rule “effectively eliminates a consideration of whether an employee performs ‘bona fide executive, administrative, or professional capacity’ duties.”

Exempt Duties Are Part Of The Analysis

Judge Mazzant wrote that although Congress delegated authority to the DOL to define and delimit the white-collar exemptions, Congress was clear when enacting the FLSA that the exemption determination needs to involve a consideration of an employee’s duties, rather than relying on salary alone. He stated that the Obama-era overtime rule that significantly increased the minimum salary levels would result in entire categories of previously exempt employees who perform “bona fide executive, administrative, or professional capacity” duties being denied exempt status simply because they didn’t meet the salary threshold. Consequently, the elimination of an analysis of duties for those who failed to meet the new high salary level was inconsistent with Congressional intent.

A Minimum Salary Level Still Acceptable

When issuing a preliminary injunction last November, Judge Mazzant’s ruling raised the question as to whether any salary threshold could be used as part of the white-collar exemption tests. In his summary judgment order, Judge Mazzant appears to leave the salary-level part of the test stand, writing “[t]he use of a minimum salary level in this manner is consistent with Congress’s intent because salary serves as a defining characteristic when determining who, in good faith, performs actual executive, administrative, or professional capacity duties.” He notes that even though the plain meaning of Section 213(a)(1) does not provide for a salary requirement, the DOL has used a permissible minimum salary level as a test for identifying categories of employees Congress intended to exempt. Citing to a report on the proposed regulations, Judge Mazzant seems to approve of setting that salary level at “somewhere near the lower end of the range of prevailing salaries for these employees.”

No Automatic Increase Mechanism

The ruling also strikes down the mechanism in the DOL’s overtime rule that provided for automatic updates to the exemption’s salary levels every three years. In a cursory paragraph, Judge Mazzant wrote that having found the rule unlawful, the automatic updating mechanism was similarly unlawful.

Back To Square One

Now that the existing, never-implemented rule has been invalidated, the DOL is starting over with revising and updating the overtime exemption rule. The DOL recently published a request for information seeking public input on what the new salary levels should be, how updates should be made, whether duties tests should be changed, and other issues affecting the white-collar exemptions. We will have to see what new proposals the DOL puts out in the months to come. But in the meantime, employers can abandon plans to address the doubled salary thresholds under the Final Rule.

On Another Note, No Pay Data To Be Collected With EEO-1 Reports

In another development, on August 29, 2017, the Office of Management and Budget (OMB) directed the Equal Employment Opportunity Commission (EEOC) to immediately stay the requirement that certain employers provide pay data as part of a new EEO-1 report. The controversial pay-data rule would have required companies with 100 or more employees (and federal contractors with 50 or more employees), to submit the wage and hour information for employees according to race, gender, and ethnicity, with the information being used by the EEOC to analyze pay discrepancies and identify possible Equal Pay Act violations. Because of the stay, covered employers should use the previous EEO-1 form, which still collects data on employee race, ethnicity, and gender by occupational categories. Despite the reprieve for employers on the pay-data rule, EEOC Acting Chair Victoria Lipnic states that her agency remains committed to strongly enforcing federal equal pay laws.

If you have any questions about these new developments, be sure to reach out to the employment counsel with whom you typically work.

July 25, 2017

DOL Signals A “Do Over” For Overtime Rule

By Mark Wiletsky

The U.S. Department of Labor (DOL) announced today that it was publishing a Request for Information (RFI) asking employers and other interested parties to provide information and ideas about the overtime exemptions. The DOL’s RFI signals an interesting development in the saga of revising the overtime rule. In short, revisions to the overtime rule are not dead, but we may be back at square one.

As you likely know, the new overtime rule that was set to take effect on December 1, 2016, would have raised the minimum salary level for the executive, administrative, and professional exemptions from $455 per week ($23,660 per year) to $913 per week ($47,476 per year). Before the rule could go into effect, however, a federal district judge in Texas issued an order stopping implementation of the rule nationwide. The judge’s order suggested that the DOL lacks the authority to set any minimum salary level for the so-called white-collar exemptions under the Fair Labor Standards Act (FLSA). Last December, the DOL under the Obama Administration appealed that order to the Fifth Circuit Court of Appeals, seeking to overturn the injunction.

After the Trump Administration took over in January, it became unclear whether the DOL would continue with its appeal of the nationwide injunction on the overtime rule before the Fifth Circuit, or if it would instead withdraw the appeal, essentially allowing the injunction to stand. However, on June 30, 2017, the DOL, under new Secretary of Labor Alexander Acosta, filed a reply brief in support of the appeal.

As explained in its June 30th reply brief, the DOL argued that it has the authority to set a minimum salary threshold for the exemptions, an issue that the federal district judge questioned in his November 22, 2016 injunction order. The DOL, however, wrote that it has “decided not to advocate for the specific salary level ($913 per week) set in the final rule at this time and intends to undertake further rulemaking to determine what the salary level should be.”

By publishing the RFI, the DOL again seeks public comment to essentially begin anew the whole process of revising the overtime rule. Secretary Acosta has indicated in other forums that the DOL was not opposed to raising the minimum salary levels for the white-collar exemptions, just not to the high level set in the 2016 rule. With the publication of the RFI, it is clear that the DOL wants to rework the exemption tests and seeks input from businesses, employees, and interested associations and groups on what those tests should be.

This is an excellent chance for employers to be heard. This DOL will likely be more receptive to resolving the burdens and hardships expressed by businesses in implementing changes to the overtime exemptions so I would expect that the agency will seek to simplify the exemption tests and offer sufficient time for employers to implement them. That said, the DOL may need to fast track the new rulemaking process so that it is ready to implement a replacement rule when litigation over the existing rule is resolved.

June 7, 2017

DOL Withdraws Obama-Era Interpretations On Independent Contractors and Joint Employment

By Brad Cave

On June 7, 2017, the U.S. Department of Labor (DOL) announced that it was withdrawing two informal guidances, namely a 2015 administrator interpretation on independent contractors and a 2016 administrator interpretation on joint employment, effective immediately. The DOL’s short announcement states that the removal of the administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), and that the DOL “will continue to fully and fairly enforce all laws within its jurisdiction.” Here’s an attempt to read between the lines and determine the DOL’s position on these two issues.

Withdrawal of Independent Contractor Interpretation

When we wrote about the July 15, 2015 independent contractor interpretation here, we noted that then-Wage and Hour Division Administrator David Weil stressed that most workers meet the criteria to be deemed employees under the FLSA, and therefore, should not be treated as independent contractors. Although noting that multiple factors are used to determine independent contractor status, former administrator Weil stated that the DOL would focus primarily on whether the worker runs his or her own independent business or if instead, the worker is economically dependent on the employer.

Withdrawal of the 2015 interpretation guidance does not change the fact that to “employ” is broadly defined in the FLSA as “to suffer or permit to work” and consequently, most individuals hired to perform work fall within that definition as an employee. In addition, the long-standing  multi-factor “economic realities” test used by courts to determine whether a worker is an employee or an independent contractor will continue to apply.

That said, the withdrawal of the 2015 administrator interpretation may be a signal that the DOL will no longer focus on misclassifications of independent contractors with the same fervor as it previously did. A more business-friendly DOL may choose to rely on certain factors, such as an independent contractor agreement setting forth the business relationship and the comparative degree of control over the work exerted by the two parties, over those factors that were highlighted in former administrator Weil’s interpretation, such as whether the worker runs his or her own independent business. The distinction between employees and independent contractors remains, but query whether this DOL, under the direction of new Secretary of Labor Alexander Acosta, will change the balance in determining independent contractor status.

Joint Employment Interpretation Withdrawn 

When the DOL issued its administrator interpretation on joint employer status in February 2016, we wrote here that the DOL made it clear that the agency planned to examine dual employer relationships very closely, with an apparent intent to find joint employer status in more circumstances under both the FLSA and the MSPA. By withdrawing that interpretation, the DOL may be suggesting a contraction of its efforts to find joint employer status. If that is the case, employers who utilize workers employed by a staffing agency or other workers provided by a third-party may face less scrutiny (and potentially, less liability) for wage and hour violations as a potential joint employer. In addition, companies that use the same workers across different subsidiaries or among other legally distinct entities may see a relaxation of the DOL’s emphasis on joint employer status.

The Tea Leaves Say . . .

Employers should stay vigilant about ensuring that workers they treat as independent contractors meet the multi-factor tests for independent contractor status. Similarly, organizations that could be subject to the joint employer analysis should examine their status under the applicable tests and are urged to review their third-party staffing arrangements to ensure compliance with wage and hour (and other DOL-enforced) laws. But, with the withdrawal of some of the more proactive enforcement approaches of the past administration, the DOL may be signaling its more business-friendly stance. Perhaps the National Labor Relations Board (NLRB) will be next to announce a less aggressive view towards finding joint employer status and a retraction of other arguably expansive positions taken in past years. We’ll keep you informed as new developments arise.

May 3, 2017

Is Comp Time Coming To The Private Sector?

By Mark Wiletsky

Employees in the private sector may have the option of earning compensatory time off in lieu of overtime pay for hours worked in excess of forty hours per week. The U.S. House of Representatives recently passed the Working Families Flexibility Act of 2017, H.B. 1180, which would amend the Fair Labor Standards Act (FLSA) to permit employees in the private sector to receive compensatory time off at a rate of not less than one and one-half hours for each hour of overtime worked. The bill now heads to the Senate for consideration.

Eligibility For Comp Time

Under the FLSA, compensatory time in lieu of overtime pay has long been permitted for public sector government employees. But non-government, private sector employees have not had the option of accruing comp time as the FLSA requires that private sector employers compensate overtime only through pay. Under this bill, private sector employees who have worked at least 1,000 hours for their employer during a period of continuous employment with the employer in the previous 12-month period may agree to accrue comp time instead of being paid overtime pay.

Employee Agreement For Comp Time

Under the bill, an employer may provide comp time to employees either (a) in accordance with the provisions of an applicable collective bargaining agreement for union employees, or (b) in accordance with an agreement between a non-union employee and the employer. In the case of non-union employees, the agreement between the employee and the employer must be reached before the overtime work is performed and the agreement must be affirmed by a written or otherwise verifiable record maintained by the employer.

The agreement must specify that the employer has offered and the employee has chosen to receive compensatory time in lieu of monetary overtime compensation. It must also specify that it was entered into knowingly and voluntarily by such employee. Requiring comp time in lieu of overtime pay cannot be a condition of employment.

Limits On And Pay-Out Of Accrued Comp Time

The bill specifies that an employee may not accrue more than 160 hours of comp time. No later than January 31 of each calendar year, the employer must pay out any unused comp time accrued but not used during the previous calendar year (or such other 12-month period as the employer specifies to employees). In addition, at the employer’s option, it may pay out an employee’s unused comp time in excess of 80 hours at any time as long as it provides the employee at least 30-days’ advance notice. An employer may also discontinue offering comp time if it provides employees 30-days’ notice of the discontinuation.

The bill provides that an employee may terminate his or her agreement to accrue comp time instead of receiving overtime pay at any time. In addition, an employee may request in writing that all unused, accrued comp time be paid out to him or her at any time. Upon receipt of the pay-out request, an employer has 30 days to pay out the comp time balance. Upon termination of employment, the employer must pay out any unused comp time to the departing employee. The rate of pay during pay-out shall be the regular rate earned by the employee at the time the comp time was accrued, or the regular rate at the time the employee received payment, whichever is higher.

Employee Use of Comp Time

Under the bill, employers must honor employee requests to use accrued comp time within a reasonable period after the request is made. Employers need not honor a request if the use of comp time would unduly disrupt the operations of the employer. Employers are prohibited from threatening, intimidating, or coercing employees either in their choice in whether to select comp time or overtime pay, or in their use of accrued comp time.

Will It Pass?

The bill passed the House 229-197, largely along party lines with all Democrats and six Republicans voting against it. Reports suggest that although Republicans hold 52 seats in the Senate, they will need at least eight Democrats to vote in favor of the bill to avoid a filibuster. Supporters of the bill urge that it offers workers more flexibility and control over their time off. Those who oppose the bill say it could weaken work protections as it offers a promise of future time off at the expense of working overtime hours for free. This is not the first time that federal comp time legislation has been proposed, so we will have to see if the Senate can line up sufficient votes to pass it this time around. Stay tuned.

March 7, 2017

Utah Payment of Wages Act Amendments Passed

By Bryan Benard

On March 7, 2017, the Utah Legislature passed a bill amending certain provisions of the Utah Payment of Wages Act (“UPWA”). H.B. 238 was sponsored by Representative Tim Hawkes and if signed into law by the Governor, will make three primary changes to the law.

Individual Liability For Payment of Wages 

First, the bill changes the definition of “employer” from a unique Utah definition to the definition of employer as used in the federal Fair Labor Standards Act (“FLSA”). The change will allow case interpretation of the FLSA definition of employer to apply to Utah employers under the UPWA. The reason behind this change is to clarify that in certain situations, individual directors and officers of companies may be held individually liable for the non-payment of wages. In a 2015 case, the Utah Supreme Court had ruled that there was no individual liability under the UPWA (Heaps v. Nuriche, 2015 UT 26), causing the Utah legislature to take action this session to effectively overrule that decision, replacing it with the individual liability standards applicable under the FLSA.

Private Cause of Action 

Second, this new law expressly creates a private cause of action for wages under the UPWA. This change also was prompted by a court ruling, namely Self v. TPUSA, Inc., 2009 U.S. Dist. LEXIS 10822, D.Utah Jan. 16, 2009, in which the federal court in Utah suggested that there was no private right of action under the UPWA. After the effective date of the new amendments, a private citizen clearly has the right to file a lawsuit to recover payment of wages under the UPWA in Utah state court. The amendments also provide that Utah state courts may award actual damages (i.e., the unpaid wages), a potential penalty for the violation, and an amount equal to 2.5% of the unpaid wages owed for up to 20 days.

Administrative Process Mandatory For Smaller Wage Claims 

Finally, the new law requires that certain wage claims alleging a violation of the UPWA be filed first with the Utah Labor Commission. Currently, employees “may” file a wage claim at the Commission. After enactment, all wage claims that are less than $10,000 must first be filed with the Labor Commission and the party must exhaust the administrative remedies there on such claims. Claims that are greater than $10,000, employees with multiple claims (that aggregate above $10,000), or multiple employees in the same civil action whose claims together are greater than $10,000, may file such claims directly in court without exhausting the administrative remedies.

Next Steps 

Utah employers should certainly take note of these changes, and specifically the potential for individual liability of directors and officers for the payment of wages. It is also worth watching to see if the new express private right of action increases the amounts of wage claims brought in Utah.

December 21, 2016

No Such Thing As A Free Lunch!

Cave_BradBy Brad Cave

Hundreds of hourly employees sued their former employer alleging that they were due additional overtime pay. They asserted that the company failed to include their $35 daily travel meal reimbursement in their regular rate of pay when calculating time-and-one-half, meaning they were paid less overtime than they were due. The Tenth Circuit Court of Appeals, whose decisions apply to Wyoming, Colorado, Oklahoma, Kansas, New Mexico, and Utah, recently analyzed their claim.

Calculating Regular of Pay

The Fair Labor Standards Act (FLSA) requires employers to pay employees at one and one-half times the employee’s “regular rate” of pay for all hours worked in excess of 40 per workweek. An employee’s regular rate of pay includes all remuneration paid to the employee, subject to certain exceptions. If a part of an employee’s pay is left out of the “regular rate” calculation, the employee’s overtime rate will be undervalued.

A large group of former hourly employees for a nationwide seismic-mapping services company filed a lawsuit claiming that the company violated the FLSA by failing to include an established meal allowance, which was paid to employees while traveling, in the employees’ regular rate of pay.  In their collective action, the parties asserted that the company required employees to travel away from home and stay in hotels near remote job sites for four to eight weeks at a time. Employees then typically returned home for about two to four weeks before traveling to another remote location. They often worked more than 40 hours per week while at the remote location, triggering overtime pay.

Per Diem For Meals

The company provided its employees with a $35 per diem for meals for all days at the remote location as well as the days spent traveling to and from the remote job location. The company did not pay the $35 meal reimbursement on days that employees worked from their home location or when food was provided at the remote job site.

Exception To “Regular Rate” For Traveling Expenses

The regular rate of pay generally must be calculated to include all remuneration for services paid to the employee.   One exception to this rule is that employers can exclude from the regular rate all reasonable payments for traveling expenses incurred by an employee in the furtherance of his employer’s interests and properly reimbursable by the employer. The regulations state that this exemption includes the “reasonably approximate amount expended by an employee, who is traveling ‘over the road’ on his employer’s business, for . . . living expenses away from home . . . .” 29 C.F.R. § 778.217(b)(3). The company argued that the $35 meal payments were exempt travel expenses and therefore, need not be included in the calculation of the employees’ regular rate.

Meal Reimbursement Was Exempt Travel Expense

The employees countered by arguing that the $35 payments were not exempt travel expenses because the employees were no longer traveling while they worked at the remote job sites for four to eight weeks at a time. They also argued that the phrase “living expenses” did not include the cost of food. The Tenth Circuit disagreed on both arguments.

The Court reasoned that the employees’ position that they were no longer “traveling over the road” when they reached their remote job site was a “hyper-literal interpretation.” The Court instead read “traveling” more broadly to include not just time in transit, but also time away from home. On the employees’ argument that the cost of food did not qualify as a “living expense,” the Court agreed with prior determinations by the U.S. Department of Labor to find that the cost of food away from home is an additional expense that the employee incurs while traveling for the employer’s benefit and therefore, is a living expense. The Court ruled that the $35 per diem meal reimbursements were exempt travel expenses and need not be included in the employees’ regular rate when determining overtime pay. The Court upheld summary judgment in favor of the company. Sharp v. CGG Land Inc., No. 15-5113 (10th Cir. Nov. 4, 2016). Read more >>

December 1, 2016

DOL Appeals Overtime Rule Injunction: Webinar At Noon (MT) Today

6a013486823d73970c01b8d1dc5d4a970c-120wiBy Mark Wiletsky

On the very day that its final overtime rule was supposed to go into effect, the U.S. Department of Labor filed an appeal of last week’s preliminary injunction that temporarily halted the rule. The appeal will be heard by the Fifth Circuit Court of Appeals, which is located in New Orleans, Louisiana.

Will Appeal Be Expedited?

Appellate rules for the Fifth Circuit permit parties to file a motion for an expedited appeal, which means the appeal would be heard and ruled upon in a much shorter timeframe than normal, e.g., the normal timeframe for an appeal can be a year to 18 months. The court will grant such motion only for good cause. We expect that the DOL might try to expedite its appeal, especially given the change in administration coming in late January. As of this morning, however, there is no indication that the DOL has moved for an expedited appeal, but it is possible that it hasn’t been listed on the docket or otherwise been made public yet.

The DOL could also ask the district court to stay the preliminary injunction pending the appeal – in other words, to allow the new overtime rules to go into effect pending the outcome of the appeal. It is unlikely that the district court judge would grant a stay, but it would be a logical next step. Again, no motion to stay the injunction is yet listed on the court’s docket.

Webinar At Noon To Discuss Injunction and Appeal

Please join our free webinar at noon (MT) today (December 1, 2016) as I discuss what the preliminary injunction of the DOL’s overtime rule and the pending appeal mean for employers. I’ll also discuss options for employers who have been considering, or may even have implemented pay practices in anticipation of the overtime rule changes. Register for the webinar here. We will record the webinar for those unable to attend.

November 28, 2016

Dora Lane and Steve Gutierrez Discuss Impacts of Hold on Proposed Overtime Rule

pay-stub-and-money-shutterstock_373813009Holland & Hart labor and employment attorneys Dora Lane and Steve Gutierrez discuss potential impacts on employers and employees of the hold on the proposed Overtime Rule. Dora Lane was interviewed on Reno’s Channel 2 News.  Steve Gutierrez talked with KDVR Fox 31 in Denver.

Watch the Reno interview 

Watch the Denver interview

November 23, 2016

DOL’s Overtime Salary Threshold Increase Is On Hold – Now What?

6a013486823d73970c01b8d1dc5d4a970cBy Mark Wiletsky

Many human resource professionals got into the office today not knowing whether to laugh or cry. Most are happy that the Department of Labor’s (DOL’s) new overtime salary requirement will not go into effect next Thursday, December 1, 2016, due to a federal judge’s grant of a nationwide preliminary injunction which prevents the DOL from implementing and enforcing the new rule. (See our post yesterday reporting on the injunction.) Yet, many organizations have already spent countless hours preparing for the new rule to go into effect next week and are wondering what to do now. Let’s review where things stand and your best options going forward.

Nationwide Injunction Delays Final Overtime Rule 

In September, twenty-one states sued the DOL in federal court in Texas seeking to stop the DOL’s final rule that more than doubles the salary threshold for the so-called white collar exemptions and calls for automatic increases every three years. Business groups and industry associations also filed suit in the same Texas court seeking a similar outcome. The state-plaintiffs filed an emergency motion for a preliminary injunction. Shortly thereafter, the business-plaintiffs filed an expedited motion for summary judgment. The two cases were consolidated under Judge Amos L. Mazzant, III.

On November 16, 2016, Judge Mazzant heard oral argument on the state-plaintiffs’ emergency preliminary injunction motion. He issued his ruling yesterday, granting the preliminary injunction on a nationwide basis.

To prevail on their preliminary injunction motion, the states needed to show, among other things, that they would have a substantial likelihood of success on the merits of their case. The court ruled that the states met that burden, finding that the plain meaning of the executive, administrative, and professional exemptions in the Fair Labor Standards Act (FLSA) focused only on the duties of such positions, without a minimum salary level. The court stated that although the FLSA delegated authority to the DOL to establish the types of duties that might qualify an employee for these exemptions, it did not authorize the Department to disqualify employees who meet the duties requirements but do not meet the salary level established in the DOL’s final rule. The court concluded that the DOL exceeded its delegated authority and ignored Congress’s intent by raising the minimum salary level so that it “supplants the duties test.”

Anticipating The Next Legal Move

The preliminary injunction is only the first step in this legal challenge to the DOL’s final overtime rule, but it provides a huge blow to the Obama administration’s efforts to raise wages for U.S. workers. The DOL could appeal the court’s ruling to the Fifth Circuit Court of Appeals, but according to a DOL statement, the agency is still “considering all of [its] legal options.” Whether an appeal would be successful is unknown. Absent an appeal, the Texas lawsuits continue, with a permanent resolution still to be decided. Read more >>