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Texas court hands employers another win, strikes down Dept. of Labor's new salary basis level

September 1, 2017

Weekly timesheetEmployers received great news on Aug. 31, 2017, when United States District Court for the Eastern District of Texas ruled that the Department of Labor (DOL) exceeded its authority by increasing the salary basis requirement from $455 to $913 per week. The salary increase represented former President Barack Obama’s last effort to impact wages under the Fair Labor Standards Act (FLSA). We wrote about the Obama-era salary basis increase in various blog posts, including earlier this week in a post addressing the DOL’s request for public comments regarding the salary basis test.

In striking down the DOL’s salary increase, the court stated that the FLSA defined the so-called “white collar” exemptions for administrative, executive and professional employees based on the duties those employees perform. According to the court, the DOL “does not have the authority to use a salary-level test that will effectively eliminate the duties test” required by the FLSA. The court did recognize the DOL’s authority to set a minimum salary level based on a prior ruling of the Court of Appeals for the Fifth Circuit.

The court distinguished the DOL’s use of the $455 per week salary threshold from the proposed increase to $913 by stating that the former “sets the minimum salary level as a floor” that effectively “screens out” employees who are “obviously nonexempt.” The court did not elaborate how the proposed $913 per week level did not set a similar floor or screen out obviously exempt employees. The court commented that, had the $455 weekly threshold simply been adjusted for inflation, such an increase would have been lawful.

Because the Texas court’s ruling invalidates the DOL’s salary increase nationwide, and since the DOL has already indicated it does not intend to pursue enforcement of the rule, employers can breathe a sigh of relief. The court’s decision, however, may influence how the DOL addresses and responds to public comments and whether it makes any changes to the current salary basis or duties test in the future.

Interested parties may find additional information regarding submission of comments on the Federal Register website. The comment period will close on Sept. 25, 2017.

Stay tuned for updates.

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