Federal Court Rules USDOL Final Rule on White Collar Exemptions Is Invalid

By September 7, 2017 Labor and Employment


Last year, we reported on the Final Rule published by the United States Department of Labor (USDOL) updating its White Collar exemption regulations. The Final Rule raised the minimum salary requirement from $455 per week ($23,660 annually) to $913 per week ($47,476 annually) in order to satisfy the White Collar (executive, administrative, professional) exemption.

The State of Nevada, along with twenty other states, and the Plano, Texas Chamber of Commerce, along with over fifty other business groups, filed suit against the USDOL challenging the Final Rule. The States and the Business Groups sought a preliminary injunction to prevent the Final Rule from going into effect on December 1, 2016. The United States District Court for the Eastern District of Texas granted a preliminary injunction in late November, 2016. Thereafter, the States and the Business Groups asked the Court to render a summary judgment in their favor declaring the Final Rule invalid.

On August 31, 2017, the United States District Court issued its Memorandum Opinion and Order granting summary judgment to the States and the Business Groups and declaring that the USDOL Final Rule expanding the minimum salary requirement for the White Collar exemptions invalid.  A copy of the Court’s memorandum Opinion and Order can be found here.

The Court determined that the USDOL exceeded its authority and violated Congressional intent by doubling the minimum salary requirement. The Court undertook a review of the language and history of the section of the Fair Labor Standards Act at issue (29 U.S.C. § 213(a)(1)) and concluded that it was the clear intent of Congress that the White Collar exemptions be defined by the nature of the duties performed by the employee.

The Court concluded that “[t]he updated salary-level test under the Final Rule does not give effect to Congress’s unambiguous intent” and went on to state: “Congress unambiguously directed the Department to exempt from overtime pay employees who perform ‘bona fide executive, administrative, or professional capacity’ duties. However, the Department creates a Final Rule that makes overtime status depend predominately on a minimum salary level, thereby supplanting an analysis of an employee’s job duties. [. . .] The Final Rule more than doubles the previous minimum salary level. By raising the salary level in this manner, the Department effectively eliminates a consideration of whether an employee performs ‘bona fide executive, administrative, or professional capacity’ duties.”  The Court’s Memorandum Opinion and Order ends with the following line: “The Court concludes the Department’s Final Rule described in 81 Fed. Reg. 32,291 is invalid.”

It is unlikely that the current administration will appeal the Court’s order on summary judgment in an effort to save the Final Rule. It is more likely that the administration will direct the USDOL to establish new regulations for the White Collar exemptions. In fact, the USDOL has already taken steps in that direction. In July, the USDOL issued a Request for Information seeking input and information from the public to aid the USDOL in formulating a proposal to revise the White Collar exemption regulations. The USDOL has made clear (here) that it is still accepting comments on a possible revision to the regulations after the Court struck down the Final Rule.

Stay tuned, but it will likely take many months (or years) for the USDOL to get to the point of issuing new regulations.