On June 30, 2017, the Department of Labor filed its reply brief with the 5th Circuit Court of Appeals.  A copy of the brief can be found here. Thus, the Texas lawsuit that has put the overtime regulations overhaul on hold nationwide, is now in the hands of the 5th Circuit.  Any question as to whether the Department of Labor would chose to withdraw the appeal has been answered in the negative. Significantly, however, the Department of Labor has withdrawn its appeal with respect to the legality of the specific $913 per week ($47,476/year) salary threshold:

“The Department 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.  Accordingly, the Department requests that this Court address only the threshold legal question of the Department’s statutory authority to set a salary level, without addressing the specific salary level set by the 2016 final rule. In light of this litigation contesting the Department’s authority to establish any salary level test, the Department has decided not to proceed immediately with issuance of a notice of proposed rulemaking to address the appropriate salary level….Instead, the Department soon will publish a request for information seeking public input on several questions that will aid in the development of a proposal.”

Accordingly, the question now is simply whether the Department of Labor has the authority to set a specific threshold or whether Congress must do so. And again, we wait.

I was presenting a “Hot Topics in Employment Law” update at our 12th Annual Labor Law Forum in Bloomington, Minnesota today, and realized that I had gotten woefully behind on staying updated as to the status of the FLSA white-collar overtime regulations overhaul. So, here it is. As of April 19, 2017, the 5th Circuit Court of Appeals has granted the U.S. Department of Labor’s second unopposed motion to extend the deadline to file its reply brief, as the nominee to be the Secretary of Labor had not yet been confirmed. The Court granted the motion, allowing the DOL until Friday, June 30, 2017 to file its reply brief (or withdraw its appeal).

On April 28, 2017, R. Alexander Acosta was sworn in as the 27th United States Secretary of Labor. Accordingly, I suspect there will be no more delays, and, looking into my crystal ball, will not be shocked if the DOL chooses to withdraw its appeal.

Man runningOn December 8, 2016, the 5th Circuit Court of Appeals granted the Department of Labor’s request for an expedited appeal in the Texas overtime litigation. Recall, this is the litigation that put a halt to the December 1, 2016 revisions to the FLSA salary thresholds for white collar workers. What does this mean for employers? The wait continues. Briefing will take place through late January 2017, and then oral argument will be scheduled thereafter. Notably, this means that the DOL will be under the oversight of President-Elect Trump before it goes to oral argument, and therefore it may chose to drop the appeal at that time. I’ll keep you posted.

news-426892One of my new “fall favorite” shows is ABC’s Notorious. In it, a criminal defense attorney teams up with a major TV producer to attempt to control the media, justice, and public opinion by putting various individuals on the edgy national news show. So, when I got the United States Department of Labor (DOL) email today from the news subscription service, I read it and chuckled, instantly thinking of Notorious.

Following up to my post earlier today, the DOL issued a news release late this morning regarding its decision to file a Notice of Appeal in the Texas overtime litigation. In the release found here, the DOL argues its case via the media to the public:

The Department has always recognized that the salary level test works in tandem with the duties tests to identify bona fide EAP employees.  The Department has updated the salary level requirements seven times since 1938.”

Naturally, the DOL points out that it “strongly disagrees with the decision by the court” and that the Final Rule “is the result of a comprehensive, inclusive rule-making process” and notes that, “we remain confident in the legality of all aspects of the rule.”

Notice of Appeal_Page_1On December 1, 2016, the day the Final Rule regarding the Fair Labor Standard’s Act (FLSA) was to go into effect, the U.S. Department of Labor (DOL) filed its Notice of Appeal of the Eastern District of Texas’ November 22, 2016 Memorandum Opinion and Order to the Fifth Circuit. What does this mean? Well, it seems largely symbolic to me – the DOL had plenty more time to file the Notice of Appeal, but did it on December 1. Coincidence? I think not. From here the Fifth Circuit will set a briefing schedule and decide whether to hear oral arguments. That being said, the briefing will not be due until after the Trump Administration takes office. So, whether the DOL chooses to withdraw the appeal, only time will tell. For now, employers should stay the course – continue to verify your employees are properly classified, and keep your ears open on this issue until a final decision has been made.

Money2Well, by now everyone is aware of the injunction on the December 1, 2016 FLSA overtime Final Rule. Many employers had decided (a/k/a were forced) to increase an exempt employee’s salary to $47,476 to meet the DOL’s new (and now on hold) $47,476 threshold. So, now what? Can an employer just revert the employee’s salary, or not increase it as planned? Let’s put employee morale aside too…because certainly any reversion of a salary is not going to sit well with the employee who now may feel undervalued (and/or question whether he or she is properly classified anyway).

The Fair Labor Standards Act (FLSA) doesn’t address “promised” wages; accordingly, there is no federal requirement that an employee be paid a promised wage following an intervening event. Similarly, the Minnesota Fair Labor Standards Act (MnFLSA) does not impose any requirements on “promised wages”. But, Minnesota law does provide employees some protections in certain circumstances.

In Minnesota, “wages” is defined as: “Compensation due to an employee by reason of employment”.  Minn. Stat 177.23, Subd. 4.  Further, an employer cannot “directly or indirectly and with the intent to defraud…(2) directly or indirectly demand or receive from any employee any rebate or refund from the wages owed the employee under contract of employment with the employer…” or the employer can be liable for twice the amount in dispute.  Minn. Stat. 181.03. Why do I bring up this statute? Well, a salaried employee who is told she is getting a raise may try to argue she has a contract that she is “owed” those wages for the work she performs during the time frame she was told she’d get the raise. Is this a stretch? Probably, but then again, I’ve heard more far-fetching arguments than that. Also, notice the bold – “intent to defraud” – I think it’s safe to say, no employer was attempting a bait-and-switch here; it was all regulation driven and employers had the full intent (at the time) to increase a salary just to meet the new threshold.

In any event, for the cautious employer, you may want to provide the employee notice of the decrease prior to the period in which the employee would earn that money. So, for example, if the employee was told on November 25 that she would be getting a raise to $47,476 effective December 1, and the next payroll cycle is for the workweeks of November 21 to December 4 and paid on December 9, you may want to consider reverting back during the next payroll cycle that is for the workweek of December 5 to December 18 (so long as the employee is notified prior to December 5). That being said, this approach is being cautious – certainly in this instance there would be no “intent to defraud”, however, with this delayed decrease, there is no arguable “contract” with the salaried employee for the following payroll cycle (they may argue there is a contract for the payroll cycle encompassing December 1-5).

Yes, I’m fully aware that I did not address hourly employees here. Given they are hourly, and “earn” wages on an hourly basis, I would not expect the same argument to ever even remotely pop up. Finally, don’t forget to document the payroll change, preferably with the employee signing that he or she understands the change and applicable start date of the change.

Dont miss deadlineAlready this morning, my phone has not stopped ringing and the emails continue to pour in. The word is out – Judge Mazzant granted the emergency preliminary injunction, putting the December 1, 2016 FLSA DOL regulations on hold. What does this mean for employers and HR professionals that were scrambling to meet the December 1 deadline? All of your work preparing for the revisions can – and should – be put to good use. Remember, the white-collar duties test did not change! Thus, the ONLY employees who would have (theoretically) benefited from the rule changes, were those employees who met the duties test of a white collar employee, and who were paid more than $23,660, but less than $47,476, and thus needed to get a salary increase up to at least $47,476 to remain exempt.

In other words, embrace your internal audit and continue to use the old December 1 deadline as your internal target to reclassify employees. Again, the Final Rule has just been put on hold – it may rear its ugly head in the future and you’ll be back where you started. Thus, for those employees that were found to be misclassified after your internal audit, there is no reason not to reclassify them by December 1, as you were going to do. I love wage and hour litigation, but it is not employer friendly, and certainly not cheap. Thus, the only reprieve for employers is that you no longer need to increase the salary for properly classified white-collar exempt employees up to at least $47,476, until the final outcome of the Texas cases. If someone was determined to be misclassified based on their job duties (not salary), they are still misclassified – you can cut off damages and limit your potential liability by reclassifying them sooner than later (preferably by the December 1 deadline so there is some rationale as to why you are doing it now). As to the FLSA Texas cases and final outcome of the litigation – only time will tell. I’ll keep you posted.

Shermancourthouse1The Paul Brown United States Courthouse may be small, but as with everything in Texas, its reach is big and mighty.  On November 22, 2016, Judge Mazzant, of the Eastern District of Texas, Sherman Division, gave employers nationwide something to be thankful for this Thanksgiving. As I wrote about earlier, 21 states challenged the U.S. Department of Labor’s (DOL) revisions to the FLSA overtime regulations, as did over 50 businesses. The State Plaintiffs sought an emergency preliminary injunction, asking the Court to enjoin (put on hold) the Final Rule from taking effect, while the case is argued on its merits (which, you can imagine, takes much more time). The Court agreed in its Order today, that every state in the nation would be irreparably harmed if the Final Rule was allowed to proceed on December 1, 2016. Essentially, the December 1, 2016 deadline is no more, and the effective date has been put on hold pending the Court’s determination of whether it believes the Final Rule is valid.

Specifically, the State Plaintiffs questioned: (1) whether the Final Rule is lawful; (2) whether the DOL has the authority to promulgate it; and (3) whether the automatic salary updating mechanism complies with the Administrative Procedures Act.  In coming to its decision, the Court only had to address one, deciding that, “Congress defined the EAP [Executive, Administrative & Professional] exemption with regard to duties, which does not include a minimum salary level.” Further, the Court noted that the plain meaning of the statute explicitly delegates the DOL to, “establish the types of duties that might qualify an employee for the exemption, [and that] nothing in the EAP exemption indicates that Congress intended the Department to define and delimit with respect to a minimum salary level.” Accordingly, the Court concluded that the DOL’s Final Rule, “exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test” and is therefore unlawful.

If Congress intended the salary requirement to supplant the duties test, then Congress, and not the Department, should make that change.”

The Court did not analyze the legal issues relating to the automatic salary threshold or any of the State Plaintiff’s other arguments, given its decision with respect to the unlawful establishment of the minimum salary level.

Further, the Court held that if indeed the DOL lacks the authority to promulgate the Final Rule, then the public will be harmed by its enforcement (increased state budges, layoffs, and disruption to government functions). However, if it is ultimately decided that the DOL has such authority, then it will suffer no harm from the preliminary injunction and a delay from the enforcement. Accordingly, the Court noted:

A preliminary injunction preserves the status quo while the Court determines the Department’s authority to make the Final Rule as well as the Final Rule’s validity.”

Accordingly, the Court held that, “A nationwide injunction is proper in this case. The Final Rule is applicable to all states. Consequently, the scope of the alleged irreparable injury extends nationwide. A nationwide injunction protects both employees and employers from being subject to different EAP exemptions based on location.”  In conclusion, Judge Mazzano opined:

The State Plaintiffs have established a prima facie case that the Department’s salary level under the Final Rule and the automatic updating mechanism are without statutory authority. The Court concludes that the governing statute for the EAP exemption, 29 U.S.C. § 213(a)(1), is plain and unambiguous and no deference is owed to the Department regarding its interpretation.”

So, now what? Well, we can all enjoy our Thanksgiving a bit more, halting the scrambling that has been going on to come to a final decision on reclassification issues, increases in salary, and the like. That being said, employers who did an internal audit and determined that (regardless of the salary threshold) certain employees’s duties do not meet the duties test (which has not changed), would be wise to continue with the reclassification to ensure continued compliance (and because, frankly, we still don’t know what will happen with this case yet). Certainly, employees will understand that any changes made on December 1 were made with the new (now put on hold) regulations in mind and thus, a good of a reason as any to continue with any changed classifications.

As for the Texas lawsuit, the case now proceeds on the merits, while the business world (and States) can take a breath and not worry about enforcement – for now. However, the DOL may appeal the emergency preliminary injunction. That being said, losing a preliminary injunction is generally a preview of the final ruling to come, and thus, the DOL (especially with the new administration), may chose not appeal any such decision, rather allowing the case to proceed on the merits. I’ll keep you posted.

FLSA motion hearing_Page_1Today was the big day for the hearing on the emergency motion for preliminary injunction in the Eastern District of Texas challenging the FLSA regulations overhaul. As suspected, Judge Mazzant did not rule from the bench. The hearing began at 9:00 a.m. and the minutes reflect the following issues were discussed:

  • How is this case reconciled with the Robbins case?
  • Discussion of the salary requirement.
  • Discussion of whether this should be addressed as a nationwide injunction.
  • Discussion of new Administration – Judge Mazzant noted the change in the Administration is not a basis for an injunction, his decision will be based on the law and the factors for a preliminary injunction.
  • Discussion of the DOL’s limit to define the salary limit.
  • DOL argued methodological error and had to take different approach.

At 12:40 p.m. the hearing concluded. Judge Mazzant stated he will take the motion under advisement, but anticipates that his initial ruling will be issued on Tuesday, November 22, 2016. If he denies the emergency temporary injunction, a hearing will be set for Monday, November 28, 2016 on the summary judgment motion.

I’ve been fielding calls all week as businesses are getting wind of these cases and the upcoming December 1 deadline. As I wrote about earlier, employers would be wise to continue to prepare for the regulations overhaul until the law provides otherwise.

Texas FlagSince my last update on October 25, 2016 regarding the coalition of states and businesses suing the U.S. Department of Labor over the new overtime regulations, the parties have been busy and the Court has issued a few orders. Given the results of the recent elections (and the uncertainty of what will become of the new regulations with the new administration), for now, all eyes are on Judge Mazzant and the Eastern District of Texas. Here’s what has happening with the two cases:

October 31, 2016 – DOL’s Motion To Stay Summary Judgment Denied

On October 31, 2016, Judge Mazzant denied the DOL’s motion to stay summary judgment (the expedited motion filed by the Business Plaintiffs), but granted its motion to extend time to respond to November 18, 2016.  The Business Plaintiffs’ reply is due November 21, 2016. Judge Mazzant will hear the motion on November 28, “if necessary” (meaning, if he can’t decide on the documents, which I suspect he will given the anticipated very thorough briefing that will be done). In addition, the Court held that it will consider the Business Plaintiffs’ summary judgment brief as an amicus brief in support of the States’ motion for a preliminary injunction. In other words, the Court will consider the arguments of the Business Plaintiffs in the States Plaintiffs’ motion, and allow them to be heard at that hearing. The DOL has until November 7 to respond to that amicus brief.

November 7, 2016 – DOL Files Response to Business Plaintiffs’ Amicus Brief

On November 7, 2016, the Defendant DOL filed “Defendants’ Memorandum of Law In Response to Position of the Business Plaintiffs Treated as Amici With Regard to the State Plaintiffs’ Motion for Preliminary Injunction pursuant to Order of October 31, 2016”. In English – on October 31, Judge Mazzant said he would consider the relevant portions of the Business Plaintiffs’ summary judgment brief in the States’ case.  This is often done at the U.S. Supreme Court level, and other instances where there is a lot at stake and the judge desires to have the benefit of all the positions and learned minds.  This brief is the DOL’s response to the Business Plaintiffs’ position.

November 10, 2016 – Plaintiff States Filed Their Reply Brief

Finally, the last document filed in this case to date, on November 10, 2016, the States replied to the DOL’s response to their emergency motion for preliminary injunction. In short, the States argue the DOL’s entire argument surrounds “ambiguity” made without “specific Congressional authorization.” Further, the States argue that the DOL has basically preempted the duties test and making it a “salary only” test, ignoring 75 years of the prevailing duties test. Should they lose, the States argue they will suffer irreparable harm – to the tune of $115.1 million the first year in increased state and local costs, as conceded by the DOL in its response brief. Accordingly, the Plaintiff States request the preliminary injunction be granted.

Stay tuned – the saga will continue!