The wait is finally over. On August 31, a federal judge in Texas issued an opinion formally striking down proposed Department of Labor (DOL) changes for Executive, Administrative, and Professional (EAP) employee exemptions under the Fair Labor Standards Act (FLSA). The latest decision comes several months following this judge’s earlier ruling that postponed the long-awaited implementation of new federal regulations. In case you are confused (nobody could blame you and you certainly would not be alone), here is the story.
Where it all began
Several years ago, President Obama instructed the DOL to revamp the rules pertaining to certain classes of employees (including many firefighters) who are considered exempt under the FLSA. Workers can be exempt from overtime and minimum wage if they meet certain criteria. EAP employees account for the vast majority of FLSA-exempt employees. The DOL estimates that as many as 10 million American workers are classified as EAP employees.
There are several requirements necessary to be considered an EAP employee. The employee’s duties and salary must be examined. To be considered an EAP employee, you must earn a salary of at least $455 per week. This relatively low salary threshold was the subject of much debate over the years. It seemed illogical to some that any worker earning as little as $455 per week would be exempt from both the overtime and minimum wage protections of the FLSA.
In response to President Obama’s initiative, the DOL held hearings and conducted research on the subject over the course of three years. Eventually, the DOL decided to increase the salary required to be considered an EAP employee. The DOL proposed increasing the $455 weekly salary to $913. Additionally, the DOL crafted a plan designed to prevent future inequities. The new plan would increase the minimum salary threshold over time, based on inflation and other economic statistics.
Obviously, many workers were very excited at the prospect of earning at least the minimum wage and overtime when required by law, while many employers argued these changes would result in increased costs of goods, decreased employment, and other economic hardships for businesses. The changes were set to be implemented on December 1, 2016. Just days before the implementation, Judge Amos Mazzant (a federal judge appointed by President Obama to the Eastern District of Texas) granted a preliminary injunction filed by 21 different states that opposed these new rules. By issuing the injunction, Judge Mazzant delayed implementation pending more information and arguments from both sides.
Fast forward to the final decision
Challengers to the new regulations argued many different legal theories. Most notable (and concerning for many public sector employees) of these theories was that the FLSA should not apply to state and local governments. They also argued the DOL did not have the authority to set any minimum salary requirement, and the proposed mechanism for automatic increases crafted by the DOL was also improper. Most people following the case believed the court would eventually agree with the plaintiffs and invalidate the new rule. However, the real question for some was whether the court would turn the FLSA and the DOL upside down in the process. The stakes were extremely high. Not only were the new regulations hanging in the balance, but whether public employees could enjoy the protections of the FLSA moving forward was being called into question.
On August 31, the wait was finally over. Judge Mazzant issued his final ruling invalidating the proposed changes. As expected, the decision invalidated the new EAP rules. However, the decision did not invalidate the DOL’s ability to set minimum salary requirements for EAP employees and most importantly for some observes, affirmed the FLSA applies to state and local government workers. The court simply invalidated the way the Obama-era DOL made these changes.
What is next?
Much is uncertain. Under a Democratic presidential administration, an appeal to the Fifth Circuit Court of Appeals would be expected. However, it seems unlikely the Trump-era DOL will appeal this ruling, and Judge Mazzant’s decision will probably stand. The DOL recently indicated it will revisit the salary test this presidential term. Most likely, there will be some increase in the minimum salary required to be considered an EAP employee, however it will most likely not be as high as $913 per week. Current Labor Secretary Alexander Acosta has indicated a minimum salary level around $625 per week might be more acceptable. Also, whether the DOL will attempt to adopt a mechanism to automatically increase the salary over time is very much in doubt.
As of right now, employers should follow the existing EAP rules (subject to any state or local requirements). Most likely the $455 minimum salary threshold will continue for the near future. Whether the DOL or numerous other plaintiffs in this case will appeal remains to be seen.
Here is a copy of the most recent decision.