Daily Archives: November 23, 2016

Texas Court Enjoins Salary Test For Exempt Employees

On November 22, 2016, Judge Mazzant from the Eastern District of Texas, issued a preliminary injunction, stopping the December 1 application of a huge increase in the salary test for FLSA exemptions for executive, administrative, and professional employees.  Here is the rest of the story.

Background. Both business interests (through Plano Chamber of Commerce and others) as well as a number of state AGs (including Texas) sued the Department of Labor (DOL) to enjoin the revised rules relating to executive, administrative, and professional (EAP) exemptions in the Fair Labor Standards Act (FLSA). The cases were combined by Judge Mazzant, who has issued a preliminary nationwide injunction, stopping the December 1 implementation of the significantly increased salary test. The next step will be a determination as to whether or not the FLSA supports the use of a salary test at all. A change in leadership at the DOL and US Attorney General could result in a decision to not defend the regulation.

The Memorandum Opinion and Order by Mazzant notes that the FLSA delegates to DOL the authority to define the terms “bona fide executive, administrative, or professional capacity.” However, he has concluded that this exemption can and should be defined by referencing duties without also imposing a minimum salary level. The ultimate result may be that the rule will be amended as a result of the judicial determination that only a duties test is authorized under FLSA with no minimum salary requirement to be imposed.

By the way, a minimum salary test has been in the rules since 1949! By bumping up the minimum salary so significantly (almost doubling) without a phase-in, DOL virtually guaranteed push back.

So, this still leaves you with the question of what do in response to this order. My hunch is that in January with a new administration, the salary test issue could be resolved with a decision to NOT DEFEND the rule. But that is only a hunch.  Here is a possible response:

Restore prior treatment of EAP.  For many employers, the major issue is keeping these individuals on a salary basis rather than hourly. Also, the record keeping rules do not apply to exempt employees. Many previously exempt employees are unhappy with this perceived “demotion” as well as the need to punch a clock (figuratively) and keep time records. Employers may wish to indefinitely defer changes with the understanding that these may need to be made in the future. However, if you have already increased salaries, you may not be able to put that genii back in the bottle.

No change to MLOs. But please note that this case is about the salary part of the EAP rule. That would not affect the prior rules relating to the duties test for mortgage loan officers (MLOs). According to DOL, MLOs don’t meet either the administrative or the outside sales exemptions in the FLSA based on an analysis of their duties.