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Texas Federal Judge Enjoins U.S. Department of Labor from Implementing and Enforcing its Final Rule Regarding Overtime Eligibility

Yesterday, on November 22, 2016, U.S. District Judge Mazzant from the Eastern District of Texas issued a nationwide preliminary injunction that precludes the U.S. Department of Labor (DOL) from implementing or enforcing its Final Rule increasing the minimum salary level applicable to exempt executive, administrative and professional employees (EAP) in State of Nevada v. U.S. Department of Labor, No. 4:16-CV-00731 (E.D. TX 2016). Under the Final Rule that was slated to become effective on December 1, 2016, DOL reported that 4.2 million employees who were currently ineligible for overtime would automatically become eligible as a result of the increased minimum salary level without any change in the employees’ duties.  Under the Fair Labor Standards Act (FLSA), Congress created the EAP exemptions and delegated authority to DOL to “define and delimit” them.  In evaluating the extent of DOL’s authority to define or delimit the exemptions, Judge Mazzant noted that the Congressional delegation of authority to DOL was limited by the plain meaning of the statute and by Congressional intent that the EAP exemptions under the FLSA be focused on the bona fide duties that an employee actually performs.  In its Final Rule, Judge Mazzant held DOL exceeded its authority and ignored the Congressional intent by attempting to limit the EAP exemptions not by their bona fide duties, but rather by supplanting the duties test and replacing it with a minimum salary requirement that would automatically determine an employee’s eligibility for overtime without regard to the employee’s actual job duties or responsibilities.  To the extent that the FLSA’s focus on the EAP exemptions were to be changed to a minimum salary basis rather than on the duties test, Judge Mazzant held that it was Congress that needed to enact such a change and not DOL.

To obtain a preliminary injunction, a party must satisfy four elements: a substantial likelihood of success on the merits, a substantial threat of irreparable harm if not granted, a balancing of the threatened injury to the plaintiff that outweighs damage to the defendant, and consideration as to whether the injunction would fail to serve the public interest.  Based on his consideration, Judge Mazzant determined that the State Plaintiffs had met their burden to warrant imposition of the preliminary injunction.  In determining that a national scope of the preliminary injunction was necessary, Judge Mazzant considered DOL’s position that any injunction should focus only on those states that showed irreparable harm.  He rejected DOL’s position because he noted that such a result would lead to differences in the protection of the EAP exemptions based on location.  As such, the preliminary injunction applies nationwide.  Based on his decision that DOL exceeded its authority, Judge Mazzant also held that the automatic updating mechanism of the minimum salary level in the Final Rule was precluded from coming into effect.

The lawsuit was filed by the State of Nevada which was joined by twenty other states.  A related proceeding had been filed by the Plano Chamber of Commerce which was joined by more than fifty other business organizations.  Both proceedings were consolidated.

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