DOL Moves Toward Clarity on FLSA Exemptions

The long-running saga over the U.S. Department of Labor’s (DOL) proposed revisions to the Fair Labor Standard Act’s (FLSA) overtime rules is one step closer to ending. On September 24, 2019, the DOL announced its final rule raising the salary threshold necessary to qualify for the executive, administrative and professional exemptions to $35,568 per year. Currently, the salary threshold is $23,660. The Obama administration had proposed raising the threshold to $47,476. Thus, the increase takes the salary threshold to almost exactly the midpoint between the current standard and the Obama administration’s proposal.

The new rule makes no changes to the “duties” tests necessary to satisfy the exemptions. Nor does it retain the Obama administration’s proposal to automatically increase the threshold every three years.

The new threshold is scheduled to take effect in January 2020. But today’s action does not ensure that will actually happen.

Challenges to the DOL’s Authority

Employers have been grappling with the exemption threshold since May 2016, when the Obama administration announced its increase. In November 2016, a federal judge in Texas issued a preliminary injunction blocking the new regulations from going into effect. Among other things, the court ruled that the DOL had exceeded its authority in issuing the regulations because the FLSA’s text does not mention a salary threshold. Later, in 2017, following similar reasoning, the court granted summary judgment against the department.

The DOL appealed that ruling to the Fifth Circuit. In doing so, however, it quickly asked for a stay because it intended to issue a new regulation (the one announced today). The Fifth Circuit granted the stay, and the appeal has largely been on “pause” for the last two years pending the department’s issuance of a new regulation.

But with the new rule now set to take effect, the Fifth Circuit case is seemingly poised to move forward and resolve the issue of whether the DOL has the authority to set a salary threshold in the first place.

Looking Ahead

If the Fifth Circuit affirms that part of the district court’s ruling, then the salary threshold announced today would again be invalidated.

Alternatively, the Fifth Circuit could remand the case and ask the district court to revisit its earlier analysis in light of the new rule. Or the states that filed suit challenging the rule — and remain parties to the Fifth Circuit appeal — could decide to simply drop their opposition to the DOL’s authority to set the salary threshold.

Even so, the department’s action moves employers closer to long-awaited clarity on the FLSA’s overtime exemptions. But several steps remain ahead until that clarity is truly final.