Injunction Stops New DOL Rule Increasing Salary Level Test: Now What?

Written By: Don Benson, Esq.

Many employers have been asking what is next step for them in light of the injunction issued 112/22/16 in the U.S.D.C. Texas holding that the DOL may not impose the new higher salary level for jobs exempt from overtime under the executive, administrative or professional exemptions of the federal Fair Labor Standards Act.

The preliminary injunction keeps the new higher salary level from going into effect as scheduled on December 1, 2016.

There is a two part test for these exemptions: (1) the job must have a minimal salary and (2) specific job duties. The salary portion of the test would have gone up from $23,660 annually to $47,892. The new Regulation would also have adjusted the salary level every three years automatically.

The Texas federal court found that the plaintiffs in that case showed a “likelihood of success on the merits” that the new salary requirements violated the Administrative Procedures Act. Also, the new requirement that would adjust the salary level automatically every three years which would also violate the APA.

The preliminary injunction is not a final ruling on the matter, and the Court will hold further hearings.

This injunction leaves employers with a number of uncertainties as these issues work their way through the current litigation and the politics of a change in Administrations.

First, the trial court might change the injunction after further proceedings. Or, the DOL might appeal the injunction to the Fifth Circuit Court of Appeals.

President Elect Trump has not officially announced a position, but is expected to withdraw the new DOL Regulation raising the minimal salary level.

The injunction can be found at: www.txed.uscourts.gov/d/26042.

Most employers planned to comply with the new salary rule on December 1 by some combination of: (1) changing some salaried positions to hourly positions and paying overtime, and/or (2) increasing the salary level to the new requirement level and not paying overtime for those jobs.

Some employers have expended so much time and expense planning for these changes that they will proceed to ensure continuity of operations and to avoid any employee relations problems.

Other employers will announce a postponement of the planned changes at least until the legal status of the new Rule is clarified.
Before returning employees back to exempt status, employers should consider a check-up review of whether the positions meet the job duties requirements for exemption under both the FLSA and state laws.

Another hidden pitfall in reversing an announced increase in salary can be the few state law requirements regarding notices to changes in pay. For example:

North Carolina requires 24 hours’ advance written notice: North Carolina (N.C. Gen. Stat. § 95-25.13(3)).

South Carolina requires seven calendar days’ advance written notice. South Carolina (S.C. Code Ann. § 41-10-30(A)).

Missouri requires 30 days’ advance written notice of a change. (Mo. Rev. Stat. § 290.100). There can be a penalty of $50 per employee.

Employers should be careful to check the state law where an employee primarily works for the need to provide any required notice of a reduction in pay when reversing plans to comply with the DOL salary basis rule that is now enjoined.