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November 28, 2016

A Texas federal court has temporarily stopped the implementation and enforcement of the new salary requirements for exempt employees, which were scheduled to take effect on December 1.  Employers still trying to determine whether to raise the salary of their exempt managers earning less than $47,892 a year or to treat them as hourly employees now have additional time to make their decisions, and may not have to make any changes at all.

On Tuesday, November 22, 2016, the United States District Court, Eastern District of Texas (the “Court”) entered a nationwide preliminary injunction preventing the Department of Labor (“DOL”) from implementing and enforcing the new “white collar” regulations, which would have increased the minimum salary level for exempt employees from $455 per week ($23,660 annually) to $921 per week ($47,892 annually), on December 1, 2016.

The State of Nevada and twenty other states (the “States”) filed suit against the DOL challenging the legality of the DOL’s new regulations that redefine who may be considered exempt from overtime under the Fair Labor Standards Act (“FLSA”).  Section 213(a)(1) of the FLSA creates what is commonly referred to as “white collar” exemptions.  The FLSA provides that “any employee employed in a bona fide executive, administrative, or professional capacity … as such terms are defined and delimited from time to time by regulations of the Secretary” shall be exempt from minimum wage and overtime requirements.  Although the regulations were last updated in 2004, President Obama requested the Secretary of Labor to “modernize and streamline” the existing regulations in order to keep up with the modern economy.  In response, the DOL issued new regulations that, among other things, doubled the salary level employees must be paid to qualify for the white collar exemptions.

After considering the parties arguments, the Court determined that the white collar exemptions issued by Congress were intended to apply to tasks actually performed by employees and, therefore, did not include a minimum salary level.  Because the regulations mandated a significant increase to the salary level the Court found that the regulations create a “de facto salary only test.”  Simply stated, the Court concluded that “Congress did not intend salary to categorically exclude an employee with [executive, administrative, or professional] duties from the exemption.”  Therefore, at this time the DOL will be unable to enforce the new salary requirements on December 1.  However, the status quo may only be preserved until the Court makes a final ruling in the case.

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