Co-authored by Brett Bartlett, Alex Passantino, and Kevin Young

Seyfarth Synopsis: On Thursday afternoon, a federal judge in Texas issued an order officially invalidating the U.S. Department of Labor’s 2016 overtime rule, which would have more than doubled the minimum salary level for most overtime-exempt employees. While the long awaited ruling brings a measure of closure for employers, the possibility of appeal, as well as the new administration’s efforts to revise the existing overtime exemption rules, will be critical issues for employers watch in the weeks and months to come.

For nearly a year, employers have been watching and waiting as litigation challenging the Obama administration’s revision to the FLSA’s executive, administrative, and professional (“EAP”) exemptions—a revision intended to make millions of more Americans eligible for overtime pay—wound its way through litigation in the Eastern District of Texas and the Fifth Circuit of Appeals. As of Thursday afternoon, the waiting is over: District Judge Amos Mazzant issued an order invalidating the revised rule.

The Obama DOL’s revised rule, which was finalized in the summer of 2016 and slated to take effect on December 1, 2016, would have increased the salary level required for EAP employees from $455 per week (i.e., $23,660 per year) to $913 per week (i.e., $47,476 per year). The rule also called for automatic, inflation-indexed updates to the salary level every three years. Ultimately, the revised rule did not become effective on December 1, however, because Judge Mazzant issued an order days prior that preliminarily enjoined it from going into effect.

District Judge Mazzant issued his order in two consolidated lawsuits challenging the DOL for acting beyond its rulemaking authority. The order was the result of a motion filed by a group of state attorneys general who argued that the DOL’s rulemaking was invalid, in part because it exceeded the authority Congress gave DOL to define who is a “bona fide” EAP employee who should not be entitled to overtime pay. At about the same time that the “state plaintiffs” filed their motion for preliminary injunction, which the district court granted, another set of plaintiffs—a group of business associations (“business plaintiffs”)—filed an expedited motion for summary judgment, advancing similar arguments that the DOL’s rulemaking was unlawful.

After Judge Mazzant granted the state plaintiffs’ preliminary injunction motion, the Obama DOL filed an interlocutory appeal in the Fifth Circuit attacking the injunction order. Importantly, however, this was just before the Trump Administration took office. Ultimately, briefing in the appeal was delayed as a new president settled into office and his new Labor Secretary, Alexander Acosta, took the helm at DOL. In doing so, Secretary Acosta and his Acting Solicitor were required to assess how to maneuver a proceeding involving an injunction order that on the one hand blocked the implementation of an overtime rule championed by the prior administration, but on the other hand suggested that the DOL might not have authority to set any salary level for the EAP exemptions, despite having done so for nearly eighty years.

In the meantime, the business plaintiffs’ motion for summary judgment lingered before the district court.

Thursday’s ruling was preceded by a recent flurry of activity. On Wednesday, for example, Judge Mazzant issued an order confirming no further argument was necessary on the summary judgment motion. The court also collapsed the state plaintiffs’ and business plaintiffs’ cases together and joined the state plaintiffs to the business plaintiffs’ pending summary judgment motion. Nevertheless, it seemed unlikely that Judge Mazzant would rule on the summary judgment motion before hearing from the Fifth Circuit regarding his earlier preliminary injunction order. After all, an appellate ruling on whether it was proper to preliminarily enjoin the new rule certainly could have impacted or at least informed Judge Mazzant’s reasoning on whether the rule should be declared invalid, as the summary judgment motion argued it should.

Meanwhile, at the Fifth Circuit, oral argument was slated for October 3, and the parties were jockeying for an opportunity to be heard. The business plaintiffs, who were not parties to the appeal, requested permission to appear as amici at the oral argument. Soon thereafter, all parties filed a motion to stay proceedings while they attempted to negotiate a deal that would eliminate the need for further proceedings. Indeed, even on Thursday as the district court was issuing its final judgment, the parties on appeal were filing various submissions with the Fifth Circuit.

So perhaps all were surprised when District Judge Mazzant issued orders finding that the DOL’s 2016 rulemaking was invalid, and that the AFL-CIO would not be joined to the case. The district court’s ruling on both of these issues is fairly straightforward. On the motion for summary judgment, which collapsed all parties and remaining issues into its walls, the court ruled as follows:

  • As associations and similar groups, the business plaintiffs had standing to challenge the DOL’s rulemaking.
  • The FLSA does in fact apply to state governments, contrary to the state plaintiffs’ arguments.
  • Applying Chevron deference analysis, the DOL exceeded its authority by setting a salary level test that in effect eliminated the need to consider whether employees performed duties that demonstrate their roles working in a bona fide EAP capacity, based on definitions that Congress would have understood at the time it enacted the FLSA.
  • The automatic updating provided by the DOL’s final 2016 rule was unlawful for similar reasons.
  • Clarifying an area of concern for the DOL and other stakeholders, the court did not rule on the question of whether the DOL has authority to set any salary level for the EAP exemptions. The court’s ruling concerned only the 2016 rulemaking, finding the heightened salary level under the revised rule goes too far.

In denying the AFL-CIO’s motion to intervene as a necessary or permissive party, the court reasoned:

  • The union’s motion was untimely, as it had been aware of the litigation and the issues on which it bore. Yet it waited to file its motion to intervene until material events had occurred in the litigation.
  • The union failed to show that the DOL and related defendants were not adequately representing the interests that it purported to protect.
  • The union had argued among its primary points that Secretary of Labor nominee Andrew Puzder would not protect those interests; but Alexander Acosta was confirmed as Secretary of Labor, meaning that Mr. Puzder’s potential actions never became a reality.
  • And the court would nevertheless not exercise its discretion to allow the union to join the case.

The question on everyone’s mind is: where does this leave us?

One easy answer is that with respect to the EAP exemption itself, the 2004 rule remains in place. Employees making $455 per week (i.e., $23,660 per year) and whose primary duty satisfies one of the EAP duties tests may be classified as exempt.

Beyond that, there are no easy answers. The parties are no doubt considering whether the district court’s summary judgment order, which purports to withdraw all prior rulings, renders the pending appeal moot or requires its dismissal. After all, the summary judgment motion decided by the district court presents largely the same issues currently before the Fifth Circuit—namely, the validity of the new overtime rule. Some commentators have already exclaimed that the district court’s order mooted the interlocutory appeal entirely. Our view is that the question could be more complicated. Suffice it to say, there’s a lot to digest.

Either way, it also remains unclear whether either side will appeal Thursday’s rulings. While one would assume that DOL will not, we can’t slam the door on the possibility. As we saw with the appeal of the preliminary injunction, even the new Administration’s policy differences may not override DOL’s desire to defend itself against court orders limiting its authority, as the preliminary injunction did and as the court’s summary judgment order appears to do. If DOL determines that there is an institutional need to preserve its rulemaking authority, then it is possible we might see a DOL-initiated appeal, which would further complicate the question of how the union might agitate the proceedings.

As for the AFL-CIO, next steps are even foggier at this moment. Given that the DOL has already signaled the commencement of new rulemaking on the EAP exemptions, the AFL-CIO may take the view that even a complete victory on appeal—i.e., one that would permit its inclusion in the case and the reversal of the district court’s summary judgment decision—would ring hollow, as it could be undone by the DOL’s efforts to formulate a new rule that would take the place of the Obama rule.

Without question, the Eastern District of Texas’s order invalidating the 2016 overtime rule brings a large measure of closure for employers waiting to learn whether the rule would ever go into effect. The completeness and finality of that closure will depend largely on whether the AFL-CIO seeks appeal, as well as the DOL’s anticipated efforts to implement a new rule altogether. We will, of course, continue to monitor and update you on these important events.

Authored by Alex Passantino

Seyfarth Synopsis: On July 26, 2017, the U.S. Department of Labor will publish its anticipated Request for Information on the White-Collar Overtime Exemption in the Federal Register. The RFI will give the regulated community 60 days to provide its comments in response.

The RFI seeks input on a wide variety of topics, many of which involve issues that have been raised since the Department published its final rule increasing the salary level over a year ago. With the salary level on hold, the Department has the opportunity to revisit the level–or at least to take the temperature of the regulated community.

The issues on which the Department seeks comment are:

  • Should the 2004 salary test be updated based on inflation? If so, which measure of inflation?
  • Would duties test changes be necessary if the increase was based on inflation?
  • Should there be multiple salary levels in the regulations? Would differences in salary level based on employer size or locality be useful and/or viable?
  • Should the Department return to its pre-2004 standard of having different salary levels based on whether the exemption asserted was the executive/administrative vs. the professional?
  • Is the appropriate salary level based on the pre-2004 short test, the pre-2004 long test, or something different? Regardless of answer, would changes to the duties test be necessary to properly “line up” the exemption with the salary level?
  • Was the salary level set in 2016 so high as to effectively supplant the duties test? At what level does that happen?
  • What was the impact of the 2016 rule? Did employers make changes in anticipation of the rule? Were there salary increases, hourly rate changes, reductions in schedule, changes in policy?  Did the injunction change that? Did employers revert back when the injunction was issued?
  • Would a duties-only test be preferable to the current model?
  • Were there specific industries/positions impacted? Which ones?
  • What about the 2016 provision that would permit up to 10% of the salary level to be satisfied with bonuses? Should the Department keep that? Is 10% the right amount?
  • Should the highly compensated employee exemption salary level be indexed/how? Should it differ based on locality/employer size?
  • Should the salary levels be automatically updated? If so, how?

Of course, the value of these responses ultimately is dependent on the Fifth Circuit’s decision on whether the salary test is permissible to begin with. Should the Fifth Circuit rule in the Department’s favor on that issue, the RFI responses will provide the Department with the information it needs to proceed on a new rulemaking adjusting the salary level…assuming the employer community responds.

For additional information on how to respond to the RFI, please contact OTRuleHelp@seyfarth.com or Alex Passantino at apassantino@seyfarth.com. We’ll continue to update you as additional information becomes available.

Authored by Alex Passantino

Seyfarth Synopsis: The Wage & Hour Division announced its regulatory plan for the next year and it is less ambitious than some may have anticipated.  A request for information on the overtime rule and a proposal to rescind a limited tip credit regulation are all that is on the immediate horizon for employers.

Each spring and fall, Washington waits with bated breath as the Executive Branch releases its regulatory agenda. As the first pronouncement of some of the specifics of the Trump Administration’s regulatory plans, this year’s agenda was anticipated more than most. And now we have it

The Wage and Hour Division’s initial plans include the announced Request for Information on the white collar exemptions, which is expected to be published this month. An as-of-yet-unannounced action, however, is a notice of proposed rulemaking (NPRM) that would rescind aspects of the Department’s 2011 rule related to tipped employees. Specifically, the NPRM would seek comment on the Department’s proposal to rescind the portion of the rule that restricts tip pooling for employers who do not use the tip credit to satisfy their minimum wage obligations. That rule has been the subject of much litigation, with mixed results. One of the cases may be on its way to the Supreme Court, with the Administration’s response to a cert petition due on September 8. With the NPRM slated for an August publication, it’s possible that the Administration may be seeking to avoid review by the Supreme Court on some of the touchier issues related to the proper deference a federal agency should be afforded. We’ll keep you posted.

Finally, WHD has identified a long-term plan to revisit the Section 14(c) program. Section 14(c) of the FLSA permits, under certain circumstances, employment of individuals with disabilities at subminimum wages. It is a politically sensitive program, and one in need of updating. No timetable has been provided for the Department’s review.

Co-authored by Robert J. Carty, Jr., John Phillips, and Alex Passantino

Seyfarth Synopsis: On June 30, the Department of Labor filed its reply brief to support its appeal from a preliminary injunction that enjoined the DOL from implementing its 2016 revisions to the salary-level tests for determining applicability of the FLSA’s executive, administrative, and professional exemptions. In its reply, the government argues it had the authority to make those revisions. How the Fifth Circuit handles the appeal, now that it is fully briefed, will affect what happens from here in the lower court in ways that are difficult to predict.

As we reported last week, the Department of Labor finally filed a reply brief in its appeal of the preliminary injunction prohibiting it from implementing or enforcing its 2016 “Final Rule”—that is, its revisions to the FLSA regulation governing the executive, administrative, and professional (“EAP”) exemptions.

Over the last few days, we’ve been fielding lots of questions about what might happen next. Let’s try to game it out.

But first, we should set the stage. The plaintiffs asserted three main challenges to the Final Rule:

  1. The plaintiffs contested the DOL’s very authority to implement the rule’s salary-level requirement in the first place. The district court accepted this argument—at least with respect to the 2016 Final Rule—and found it unlawful in its entirety.
  2. The plaintiffs argued that the Final Rule’s new “indexing” feature violates the Administrative Procedures Act (“APA”) because it would automatically adjust the minimum salary requirements without any notice or comment period. The district court found the indexing feature unlawful, but only because it had already struck down the entire Final Rule; it expressly bypassed the APA arguments.
  3. The plaintiffs asserted a Tenth Amendment challenge claiming that the Final Rule cannot apply to state governments. The district court rejected this position.

On appeal, the DOL initially defended the Final Rule in all respects, including its $913 weekly minimum salary. Now working under the new administration, the DOL has narrowed its approach in its reply. Rather than continuing a full-throated defense of the previous administration’s Final Rule, the DOL has now limited its argument to one (and only one) issue; it also announced its intention to revisit the $913 minimum:

The Department has decided not to advocate for the specific salary level ($913 per week) set in the final rule at this time and intends to undertake further rulemaking to determine what the salary level should be. Accordingly, the Department requests that the Fifth Circuit address only the threshold legal question of the DOL’s statutory authority to set a salary level, without addressing the specific salary level set by the 2016 final rule.

This is definitely a plot twist, and our readers understandably want to know how it might affect the outcome of this appeal.

We won’t try to predict how the Fifth Circuit will rule on the basic “authority” question. But if it agrees with the district court’s reasoning, the path forward is clear: It will affirm, and the DOL may seek rehearing and/or Supreme Court review if it believes it necessary to preserve its long-asserted authority to set a salary level.

Things will get much more complicated if the Fifth Circuit overrules the district court and finds that the DOL acted within its authority. Here are a few thoughts on what might happen in that case:

  • On the current record, it is unlikely that the court would reach the plaintiffs’ APA challenge to the new “indexing” feature, since the parties’ appellate briefs expressly avoided that issue. That said, the court could request additional briefing on the issue, or could remand the case and instruct the district court to perform an APA analysis.
  • This raises the possibility that the court could find a middle ground. That is, it could find that the DOL generally has the authority to impose a salary-level test, but that the Final Rule exceeded that authority. In that case, the court would affirm the result while disagreeing with the district court’s reasoning.
  • The court might also consider the plaintiffs’ alternative argument that the Final Rule cannot apply to state governments under the Tenth Amendment. A victory on this point, though, would apply only to the 21 State Attorneys General plaintiffs, not the other plaintiffs (a coalition of non-governmental business groups) whose case has been intermingled with that filed by the Attorneys General.
  • If the Fifth Circuit sides with the DOL on all issues, it will reverse. The question will then become whether any of the plaintiffs’ claims can survive in the wake of whatever legal conclusions the court reaches. Various stakeholders have asked us whether the Fifth Circuit would render a defense judgment if it sides entirely with DOL. We wouldn’t expect such an outcome here, because this appeal involves a preliminary injunction, and certain issues are likely to remain (thus requiring further action by the district court). For example, one of the issues raised below (but not in the appeal) is whether the Final Rule is arbitrary and capricious; the Fifth Circuit’s ruling may not resolve that question. (The business plaintiffs have raised the issue in a motion for summary judgment, which is pending in the district court.)
  • We should also note that the Texas AFL-CIO has filed a motion to intervene, which has yet to be decided. The union wants to more strenuously defend the Final Rule than it believes the Trump Administration will. This may present additional loose ends that will have to be resolved in a remand

As we ponder the possible scenarios, we should also consider a few wildcards:

  • In its reply, the DOL expresses its intention to revisit the Final Rule in a new rulemaking. Indeed, as we reported last month, the agency has announced a plan to issue a Request for Information—a “pre-rulemaking”—related to the EAP exemption. There are no guarantees on what the DOL would do with the information it receives. It might help DOL defend its authority to set a salary level; it may also help DOL develop the basis for a future rulemaking. Depending on what the DOL does, it is possible that the case could become moot altogether—for example, if it proposes and finalizes a new rule before the case concludes.
  • The Fifth Circuit may conduct oral argument and/or request additional briefing. If it does, expect us to refine our views based on what unfolds.
  • The plaintiffs could seek to file a surreply in light of the DOL’s new, more limited position. Such a brief, if filed, might be instructive.
  • A settlement may be possible. It is unclear, however, where the plaintiffs come down on the “no authority” argument versus the argument that DOL exceeded its authority in 2016. This would be a critical sticking point in any negotiated resolution.

As we try to read these tea leaves, we hasten to repeat what we said last week: “What is certain at this time is that the future of the 2016 revisions remains uncertain.” Rest assured, we’ll be watching this appeal closely. As more information comes in, we’ll continue to post updates here. Stay tuned.

Co-authored by Brett Bartlett, Alex Passantino, and Kevin Young

At last, the federal government has filed its reply brief in the Fifth Circuit concerning its appeal from a Texas district court’s order preliminarily enjoining the 2016 revisions to the FLSA’s executive, administrative, and professional exemptions. Because of the substantive and procedural complexities facing the Department of Labor (and its newly seated Secretary, Alex Acosta), we would not have been surprised to see another request for more time to file this reply—though given the number of prior extensions, there was reason to wonder whether the Fifth Circuit would grant such a request.

The complexities, in a nutshell, revolved around several points:

  1. The fact that the lower court that issued the preliminary injunction justified its order, in part, with reasoning that would suggest that the DOL does not have and has never had the authority to set a salary level test for the EAP exemptions.
  2. Although the new Secretary of Labor and the Trump administration might not want the 2016 revisions to become effective with the $913/week salary level requirement, it would be difficult to argue against the revisions without supporting the lower court’s rescission of DOL rulemaking authority.
  3. If the DOL argued against the preliminary injunction (i.e., for its reversal), the Fifth Circuit might order that the 2016 revisions become effective, whether retrospectively or at some point in the future, in connection with a holding that the district court’s order was entirely unsalvageable.

Tough stuff. And we now know the DOL made a hard choice. The Department chose to argue that it absolutely has, and always has had, the authority to set a salary level test—it chose to argue that the lower court erred in enjoining the revised exemptions from going into effect.

The DOL’s argument is more nuanced than that, however. In the simplest of terms, it attempts to walk a tight line by urging the Fifth Circuit to find that the lower court erred by concluding that the DOL did not have the authority to set a salary level test at all, but to stop short of finding that the 2016 revisions are valid as written. Somewhat subtly, the DOL suggests that the appellate court should bless the Department’s ability to reconsider what the appropriate salary level should be. Here is what the DOL writes about that:

The district court did not determine whether the salary level set by the 2016 final rule is arbitrary and capricious or unsupported by the administrative record. Because the preliminary injunction rested on the legal conclusion that the Department lacks authority to set a salary level, it may be reversed on the ground that that legal ruling was erroneous. The Department has decided not to advocate for the specific salary level ($913 per week) set in the final rule at this time and intends to undertake further rulemaking to determine what the salary level should be. Accordingly, the Department requests that this Court address only the threshold legal question of the Department’s statutory authority to set a salary level, without addressing the specific salary level set by the 2016 final rule. In light of this litigation contesting the Department’s authority to establish any salary level test, the Department has decided not to proceed immediately with issuance of a notice of proposed rulemaking to address the appropriate salary level. The rulemaking process imposes significant burdens on both the promulgating agency and the public, and the Department is reluctant to issue a proposal predicated on its authority to establish a salary level test while this litigation remains pending. Instead, the Department soon will publish a request for information seeking public input on several questions that will aid in the development of a proposal.

So where does this leave us? It is hard to predict what the Fifth Circuit will do with these arguments. The appellate court might hold oral argument. It doesn’t have to. We do not know, at this time, who the judges would be to hear the appeal. We cannot read the tea leaves based on the personal tendencies of the jurists, as a result. The court might find that the parties have provided sufficient information to allow an order based on the briefing alone. Even if it were to do that, we’d be looking at months, most likely, before we see a ruling.

And what then? The appeals court might find, as noted above, that the lower court’s order cannot stand in any way. That would create a chain of events that we all would hope to avoid. The court might, however, do as the DOL asks, reversing the preliminary injunction and giving instructions to the trial court about how to proceed. Perhaps that would open the door to some sort of compromise, which would bring its own complexities and challenges.

What is certain at this time is that the future of the 2016 revisions remains uncertain.

We will continue to monitor the situation.

Authored by Alex Passantino

Today, the DOL’s Wage & Hour Division (WHD) sent its anticipated Request for Information (RFI) on the overtime rule to the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA). Review of the RFI by OIRA is one of the final steps before publication in the Federal Register.

The RFI is expected to ask the regulated community for information regarding the impact of last year’s final rule increasing the salary level for exemption to $913/week. As our readers know, that rule was enjoined and the injunction is now before the Fifth Circuit Court of Appeals, with the Department’s reply brief due later this week. The RFI is likely to ask employers that made adjustments to their pay or operations in anticipation of the expected salary increase what the economic consequences of those adjustments have been thus far. Similarly, for employers that did not implement planned changes, the RFI likely will inquire as to what the expected consequences would have been.

Employer responses to the RFI will be critical in assisting WHD in determining next steps in the regulatory process (e.g., withdrawing the final rule, making a new proposal with a different salary level, maintaining the status quo). Be on the lookout for additional information on how to participate.

Authored by Sheryl Skibbe

On Wednesday, the Fifth Circuit Court of Appeals granted the Justice Department’s additional unopposed request for a 60-day extension to figure out its position on the new FLSA overtime exemption rules.

The stated reason for the government’s unopposed request was to “allow incoming leadership personnel adequate time to consider the issues.” Nevada v. DOL, No. 16-41606, Motion For Extension to File Reply (Feb. 17, 2017).

Presumably, the request for additional time is to permit the Senate to confirm the Trump administration’s new Labor Secretary, Alexander Acosta, and let him weigh in on the new rules. But the extension runs only to May 1, and it is not clear that the Senate could confirm Mr. Acosta and permit him to guide the government’s position by this new deadline.

Meanwhile, the district court in Texas is still considering the business groups’ motion for summary judgment to permanently invalidate the new rules and the Texas AFL-CIO’s motion to intervene in the case. A decision granting the summary judgment motion could moot the appeal if the district court enters a permanent injunction before the Fifth Circuit rules.

Authored by Kevin Young

Will the Department of Labor’s new overtime rule go into effect? When will a new Secretary of Labor be confirmed? We don’t have the answers just yet, but a lot has happened over the last few weeks to inch us closer. As things heat up, we wanted to update our readers on all the latest.

Where Do Things Stand in the Fifth Circuit?

As our readers know, Judge Amos Mazzant, a federal judge for the Eastern District of Texas, entered an order preliminarily enjoining the DOL’s new overtime rule on November 21, 2016, just days before the rule was set to take effect. The government (i.e., the defendants in the Texas litigation) appealed the order to the Fifth Circuit ten days later.

Early in the appeal, the government convinced the Fifth Circuit to address the appeal on an expedited basis. Under that schedule, briefing would have ended this week.

Under a new administration, however, the government subsequently filed an unopposed motion to extend the same briefing schedule that it previously sought to expedite so that it could reconsider the positions it has taken thus far. Late last week, the Fifth Circuit granted the motion, extending the briefing schedule to March 2.

Many employers want to know when the appeal will be decided. The answer remains unclear. Under the expedited schedule, the appeal would have been fully briefed this week and oral argument, if any, likely would’ve taken place within the next two or three months. All of that is pushed back now. Moreover, with all signals suggesting the DOL’s presumptive new leadership will take a different approach, the likelihood of there being an appeal to be orally argued is lower today than it was a few weeks ago.

How About the Rest of the Case in the Eastern District of Texas?

While many have turned their focus to the Fifth Circuit appeal of District Judge Mazzant’s preliminary injunction order, there remain two fully-briefed motions before the judge, either of which could have an enormous impact on the case: (1) the AFL-CIO’s motion to intervene as a co-defendant to defend the new rule; and (2) the business and state government plaintiffs’ motion for summary judgment.

If the AFL-CIO is permitted to intervene as a defendant, it could become more difficult for the plaintiffs to work with the government to end the proceedings altogether (which the parties might do if the union were not involved). Even if the government wanted to lay down its shield and settle the case, the AFL-CIO would still be there to defend the new rule. It’s important to note that an order denying intervention would be immediately appealable.

The plaintiffs’ summary judgment motion could be even more impactful. If the district court grants the motion, that would end the case: the new rule would be invalidated, the litigation would end, and the AFL-CIO would have no case to defend. Sure, an order granting summary judgment can be appealed—but who is going to file the appeal? It’s hard to imagine the new DOL leadership (or anyone else in the new administration) doing so. And it’s too soon to say whether the AFL-CIO would go it alone.

Speaking of DOL Leadership, When Will We Have a New Labor Secretary and How Might That Impact the Litigation?

Secretary of Labor nominee Andrew Puzder’s confirmation hearings have been pushed from Thursday, February 2 to Tuesday, February 7. With that delay, the extension obtained in the Fifth Circuit is more important, as it will give Mr. Puzder additional time to get through confirmation, land in office, and execute on any plans concerning the overtime exemptions.

While Mr. Puzder’s immediate priorities are not yet known, the public certainly has insights into his views on core issues, including the new overtime rule. After all, Mr. Puzder has been a prominent commentator on wage and hour issues, including on his blog; in his book, Job Creation: How It Really Works and Why Government Doesn’t Understand It; and in the press.

Based on prior statements, Mr. Puzder certainly seems to share the new administration’s view of an over-regulated labor market, with the new overtime rule being a prominent example. He wrote in a May 18, 2016 opinion column for Forbes:

The real world is far different than the [DOL]’s Excel spreadsheet. This new rule will simply add to the extensive regulatory maze the Obama Administration has imposed on employers, forcing many to offset increased labor expense by cutting costs elsewhere. In practice, this means reduced opportunities, bonuses, benefits, perks and promotions.

And with respect to the federal minimum wage, Mr. Puzder has signaled possible support for an increase, but certainly not to the double-digit threshold that many advocates have lobbied for (and successfully achieved in various cities and states). He explained to Fox Business on May 31, 2016:

 [Those demanding a $15 minimum wage] should really think about what they’re doing. There are solutions to this problem, and increasing the minimum wage is not the best solution. If we are going to increase the minimum wage at all, we’ve got to keep a lower minimum wage for entry-level workers, or these people are just going to be shut out of the workforce….The [Congressional Budget Office] came out with a report last year that said you could raise the minimum wage to about $9 without much impact on jobs, and you probably could do that….

Parting Thoughts.

While it’s difficult to know how all of this will unfold, it seems clear that the next couple months could be quite momentous at the district court level, the appellate level, and in Washington, D.C., where new DOL leadership should soon take the helm. We at the Wage & Hour Litigation Blog will, of course, continue to keep our readers apprised of the latest developments.

coins-currency-investment-insurance-128867Co-authored by Robert S. Whitman and Howard M. Wexler

With employers about to ring in 2017, the New York State Department of Labor—with only two days to spare—has finalized regulations to increase the salary threshold for exempt status. The regulations, originally introduced on October 19, 2016, take effect on December 31, 2016.

Employers were hopeful that the State would abandon (or delay) these regulations given the now-enjoined U.S. Department of Labor’s overtime exemption rules that were set to go into effect on December 1, 2016. In response to such concern, however, the State DOL noted, “this rulemaking is not based on, or related to, the federal rulemaking concerning salary thresholds…this rulemaking is required by law and non-discretionary. Its purpose and effect is to maintain the longstanding historical relationship between minimum wage and salary threshold amounts…”

In keeping with the upcoming gradual increase in the State’s minimum wage levels, the new tiered salary thresholds for exempt status across the state will be:

Large Employers (11 or more employees) in New York City

  • $825.00 per week on and after December 31, 2016;
  • $975.00 per week on and after December 31, 2017; and
  • $1,125.00 per week on and after December 31, 2018.

Small Employers (10 or fewer employees) in New York City

  • $787.50 per week on and after December 31, 2016;
  • $900.00 per week on and after December 31, 2017;
  • $1,012.50 per week on and after December 31, 2018; and
  • $1,125.00 per week on and after December 31, 2019.

Employers in Nassau, Suffolk, and Westchester Counties

  • $750.00 per week on and after December 31, 2016;
  • $825.00 per week on and after December 31, 2017;
  • $900.00 per week on and after December 31, 2018;
  • $975.00 per week on and after December 31, 2019;
  • $1,050.00 per week on and after December 31, 2020; and
  • $1,125.00 per week on and after December 31, 2021.

Employers Outside of New York City, Nassau, Suffolk, and Westchester Counties

  • $727.50 per week on and after December 31, 2016;
  • $780.00 per week on and after December 31, 2017;
  • $832.00 per week on and after December 31, 2018;
  • $885.00 per week on and after December 31, 2019; and
  • $937.50 per week on and after December 31, 2020.

In addition to the increased salary levels, the new regulations adjust the amount employers can deduct for employees’ uniforms and claim as a meal and tip credit in line with the gradual increase of the minimum wage toward $15. There is a tiered system for these changes as well depending on the employer’s location.

Authored by Alex Passantino

Seyfarth Synopsis: Two lawsuits related to the Department of Labor’s revisions to the white-collar exemptions have been filed in East Texas.

The first lawsuit, citing (among other things) the severe impact the impending salary increase will have on state and local government budgets, was filed by the Attorneys General of Nevada, Texas, and 19 other states (the “State AG case”). The State AG case makes a Tenth Amendment-based challenge to Congressional application of the FLSA to states. It also argues that the DOL exceeded Congressional authority with respect to the salary test, the highly-compensated employee exemption level, and indexing. The State AG case also argues that the DOL failed to follow the Administrative Procedure Act and/or that the Department exceeded its Congressional delegation of authority.

The second lawsuit was filed by a broad coalition of Texas and national business groups and trade associations. This case alleges that the DOL exceeded its statutory authority under the FLSA, both by the dramatic increase in the minimum salary level required for exemption and by the provision that would require automatic updating of that level every three years.

Both cases seek a variety of declarations regarding the unlawfulness of the DOL’s actions, as well as temporary and permanent injunctive relief preventing the rule from becoming effective on December 1, 2016.

The filing of these cases, as well as recent efforts in Congress to stop the rule (or at least to revise it), may tempt some employers into taking their foot off the pedal with respect to ensuring compliance with the new salary level by December 1. As many have learned the hard way, however, legislation and litigation are less-than-certain solutions.

Employers should continue their efforts to be compliant by December 1. If we receive legislative or judicial relief at some point, it will be much easier to stop the process than it would be to start it much closer to the effective date. In other words, Congressional or judicial relief should not be your compliance strategy.

We will, of course, continue to keep you updated on the litigation and legislative efforts. In the meantime, keep your eyes on the December 1 deadline.