The 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.