Texas District Court Finds Obama Overtime Rule “Invalid” But Salary Threshold Within DOL Authority

Sep 1, 2017

Following the nationwide injunction in November of 2016 halting implementation of the Department of Labor’s new Fair Labor Standards Act (FLSA) overtime rule, a large amount of uncertainty has existed regarding the future of the final rule. Recently, the same Texas court that halted the overtime rule in November issued a decision essentially striking down the rule for good. The final rule would have set a new salary threshold by more than doubling the minimum salary basis for the most common FLSA exceptions from the current $455 per week ($23,660 per year) to $913 per week ($47,476 per year).

On August 31, 2017, the United States District Court for the Eastern District of Texas issued a decision on the merits of the case finding that the overtime rule is “invalid” because it improperly focuses on salaries, rather than job duties to determine whether an employee is eligible for overtime pay. However, the Court found that the DOL does have the authority to establish a salary threshold, but that the threshold employed in the final overtime rule was so high that it essentially rendered the assessment of workers”™ duties irrelevant.

Meanwhile, the DOL under the Trump Administration signaled that it would still like to impose a salary threshold in a new set of regulations, although the salary is likely to be much lower. The Fifth Circuit Court of Appeals is currently considering briefs filed by both the DOL and the 21 state governors and attorney generals who challenged the rule, on the question of whether the preliminary injunction issued by the Texas District Court was proper. In its Reply Brief, the DOL specifically asked the Court to “not address the validity of the specific salary level set by the 2016 final rule” because the DOL “intends to revisit [the salary level] through new rulemaking.” The Court of Appeals has not yet issued a ruling on the validity of the injunction. However, the Texas District Court’s August 31 decision is in line with the DOL’s request to the Court of Appeals.

The DOL has already begun the process of making a new overtime rule by opening public comment on the topic in July of 2017. As a practical matter, because the Texas District Court found that generally the DOL has the authority to establish a salary threshold, the DOL is likely to include a similar salary threshold test when it reconsiders the overtime rule. While it remains unclear how the current DOL will reshape the overtime rules, some increase in the minimum salary basis is likely under the new administration, although it is expected to be much lower than that established under the Obama administration.

Tueth Keeney employment law attorneys will continue to monitor this issue and report additional developments here on the blog. In the meantime, feel free to contact a Tueth Keeney employment law attorney for further insights and advice regarding this issue and the FLSA generally.