Federal Judge Blocks FLSA Exempt Employee Rules Change

On Tuesday, U.S. District Judge Amos Mazzant, in Sherman, Texas, blocked changes to the FLSA Exempt Employee rule that extended mandatory overtime pay to more than 4 million salaried workers from taking effect.

The Department of Labor (“DOL”) recently updated the regulations governing the exemption of executive, administrative, and professional (“EAP”) employees from the minimum wage and overtime pay protections of the Fair Labor Standards Act (“FLSA”) to include a salary test starting at $47,500. Employers who classify low-salaried EAP employees as exempt would have had to comply with FLSA overtime regulations and pay such employees time and a half for hours worked over 40 hours in a single work week.

The FLSA ensures minimum wage and overtime pay protections for most employees covered by the Act. However, EAP employees have traditionally been exempt from those protections. The DOL last updated these regulations in 2004 when it set the salary level test at $23,660 annually. The new threshold would have been the first significant change in four decades.

The new rule was expected to have the greatest impact on nonprofit groups, retail companies, hotels and restaurants, which have many management workers whose salaries are below the new threshold. In addition, many small business owners were anticipated to have been affected.

Twenty-one states and a coalition of business groups, including the U.S. Chamber of Commerce, claimed that the drastic increase in the salary threshold was arbitrary. The Court ruled that the federal law governing overtime does not allow the DOL to decide which workers are eligible based on salary levels alone, saying the rule “creates essentially a de facto salary-only test,” Mazzant wrote in the 20-page ruling.

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