On August 31, 2017, a federal judge in the Eastern District of Texas ruled the Department of Labor (“DOL”) exceeded its authority by more than doubling the minimum salary level needed for an employee to qualify for the “executive, administrative, or professional” exemption from federal overtime and minimum wage laws (commonly referred to as the “white collar exemption”). U.S. District Court Judge Amos Mazzant concluded the DOL had “gone too far” by increasing the minimum salary level for exempt employees from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). Nevada v. United States Dep't of Labor, No. 4:16-CV-731, 2017 WL 3837230, at *7 (E.D. Tex. Aug. 31, 2017).
The Fair Labor Standards Act (“FLSA”) exempts from both minimum wage and overtime requirements “any employee employed in a bona fide executive, administrative, or professional capacity.” 29 U.S.C. § 213(a)(1). In enacting the FLSA, Congress did not define the terms “bona fide executive, administrative, or professional capacity” and instead delegated the power to define and delimit these terms to the Secretary of Labor through regulations, which the Secretary of Labor delegated to the DOL.
Beginning in 1938, the DOL published regulations setting out the scope of the white collar exemption, with the most recent revisions occurring in 2004. For an employee to qualify for the white collar exemption under the DOL’s revised 2004 regulations, he or she must (1) be paid on a salary basis; (2) be paid at least $455 per week ($23,660 annually); and (3) perform executive, administrative, or professional capacity duties as established by the regulations.
On July 7, 2015, the DOL published a Notice of Proposed Rulemaking in the Federal Register. 80 Fed. Reg. 38,515 (July 6, 2015). On May 23, 2016, the DOL published the final version of its revised regulation (“Final Rule”) which increased the minimum salary level for exempt employees to $913 per week ($47,476 annually). The Final Rule’s effective date was December 1, 2016.
On September 20, 2016, Texas and more than fifty-five national business groups filed suit against the DOL and asked the District Court to declare the Final Rule invalid. The Plaintiffs argued the Final Rule’s revision to the minimum salary threshold exceeded the DOL’s authority under Section 213(a)(1) of the FLSA. On August 31, 2017, the District Court agreed.
The court held the DOL “does not have the authority to use a salary-level test that will effectively eliminate the duties test as prescribed by Section 213(a)(1).” Id. The court noted the Final Rule would cause approximately 4.2 million workers to automatically become eligible for overtime compensation without a change in their duties. The court concluded the Final Rule’s significant increase in the minimum salary level “effectively eliminates a consideration of whether an employee performs ‘bona fide executive, administrative, or professional capacity’ duties.” Id. at *9.
While the federal salary basis level will not be increasing, California’s salary basis test, which is equivalent to two times the State minimum wage on an annual basis, increases with each minimum wage hike. Currently, California employers with 26 or more employees must pay a salary of at least $43,680 annually to exempt employees (and ensure the employee satisfies the duties test) to qualify for the white collar exemption. This minimum annual salary threshold will increase to $45,760 on January 1, 2018. In welcome news for California employers, the California Legislature did not pass proposed legislation that would have increased the salary basis test for all employers in California to $47,472 (AB 1565).
Employers with questions regarding the exempt employee tests may contact one of the authors or their counsel at AALRR.
- Partner
Jonathan Judge advises employers in various labor and employment law matters, including drug testing, mass layoffs (WARN), disparate impact analysis, immigration compliance, trade secrets, privacy, technology in the ...
Other AALRR Blogs
Recent Posts
- They Say Never Discuss Politics In Polite Company, But How Can Employers Handle Impolitic Off-Duty Conduct?
- DOL Permits Back-of-the-Restaurant Staff to Share in Servers’ Tips
- Can California Employers Be Liable For Failure To Prevent Something That Never Happened?
- Employer’s Delay is Fatal to Enforcement of Arbitration Agreement
- California Employers: The federal Department Of Labor’s Final Rule For Worker Classifications Does Not Eliminate The Requirements Under California’s ABC Test
- Court Holds California Law Applies to Offshore Workers on Oil Platforms
- More Training Required for Human Resource Employees and Managers in California
- Powerful Whistleblower Statute Gets Even More Costly For Employers
- New Benefits Required In Wine Country: Sonoma County Enacts Supplemental Paid Sick Leave Ordinance
- Employer Prevails in Wage and Hour Litigation Brought by Former Employee Based On Its Legally Compliant Policies and Procedures
Popular Categories
- (135)
- (41)
- (22)
- (6)
- (39)
- (31)
- (26)
- (22)
- (14)
- (5)
- (5)
- (4)
- (6)
- (3)
- (3)
- (14)
- (9)
- (2)
- (2)
- (1)
- (3)
- (1)
- (3)
- (1)
- (1)
- (2)
- (1)
- (1)
- (1)
- (1)
- (1)
- (1)
- (1)
- (1)
Contributors
- Christopher S. Andre
- Cindy Strom Arellano
- Sarkis A. Atoyan
- Alicia A. Belock
- Eddy R. Beltran
- Rex Darrell Berry
- William M. Betley
- Brigham M. Cheney
- Michele L. Collender
- Kevin R. Dale
- Scott K. Dauscher
- Alexandria M. Davidson
- William A. Diedrich
- Alfonso Estrada
- Lauren D. Fierro
- Paul S. Fleck
- Robert Fried
- L. Brent Garrett
- Carol A. Gefis
- Kieran D. Hartley
- Amber S. Healy
- Jonathan Judge
- David Kang
- Nate J. Kowalski
- Joshua N. Lange
- Catherine M. Lee
- Thomas A. Lenz
- David M. Lester
- Martin S. Li
- Elizabeth P. Lind
- Mia A. Lomedico
- Jorge J. Luna
- Michael J. Morphew
- Ronald W. Novotny
- Michael J. O'Connor, Jr.
- Aaron V. O'Donnell
- Shawn M. Ogle
- Sharon J. Ormond
- Justin R. Peters
- Chesley D. Quaide
- Todd M. Robbins
- Irma Rodríguez Moisa
- Casandra P. Secord
- Jon M. Setoguchi
- Lauren B. Shelby
- Ann K. Smith
- Amber M. Solano
- Susana P. Solano
- Ethan G. Solove
- Susan M. Steward
- April Szabo
- Jay G. Trinnaman
- Jonathan S. Vick
- Robert L. Wenzel
- Brian M. Wheeler
- Glen A. Williams
- Kimberley A. Worley
- Lisa C. Zaradich
Archives
2021
2020
- December 2020
- October 2020
- August 2020
- July 2020
- June 2020
- May 2020
- April 2020
- March 2020
- January 2020
2019
- December 2019
- November 2019
- October 2019
- September 2019
- August 2019
- June 2019
- May 2019
- April 2019
- March 2019
- February 2019
2018
- December 2018
- November 2018
- October 2018
- September 2018
- August 2018
- July 2018
- June 2018
- May 2018
- March 2018
- February 2018
- January 2018
2017
- December 2017
- November 2017
- October 2017
- September 2017
- August 2017
- June 2017
- May 2017
- March 2017
- February 2017
2016
- December 2016
- November 2016
- October 2016
- September 2016
- August 2016
- July 2016
- June 2016
- May 2016
- April 2016
- March 2016
- February 2016
2015
- December 2015
- October 2015
- September 2015
- August 2015
- July 2015
- June 2015
- May 2015
- April 2015
- March 2015
- February 2015
- January 2015
2014
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- February 2014
- January 2014
2013
- October 2013
- September 2013
- July 2013
- June 2013
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
2011
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011