Employers Shouldn’t Count on the Overtime Rule Being Overthrown by Texas Federal Court

September 21, 2016

South Carolina is one of 21 states that have joined in a federal lawsuit filed in Texas contending that the “President is trying to rewrite [the Fair Labor Standards Act].” To recap, the rule in question is actually an amendment to the FLSA’s salary basis test increasing the minimum salary amount for exempt employees from $23,660 to $47,476 annually. 

South Carolina is one of 21 states that have joined in a federal lawsuit filed in Texas contending that the “President is trying to rewrite [the Fair Labor Standards Act].” To recap, the rule in question is actually an amendment to the FLSA’s salary basis test increasing the minimum salary amount for exempt employees from $23,660 to $47,476 annually. The proposed change, effective December 1, 2016, will amend the current rule found at 29 C.F.R. §541.600.It was proposed by the Wage and Hour Division of the Department of Labor (DOL).

The position taken in the litigation is interesting in light of the fact that this amended rule, like many of the rules issued by administrative agencies, was adopted by the DOL pursuant to recognized procedures under the Administrative Procedures Act. Federal administrative agencies are permitted to promulgate rules when they have received a statutory grant from Congress to do so. While Congress passes more general statutes, Congress often also creates administrative agencies charged with creating more detailed regulations to carry out the aims of the statutes through rulemaking. The public is informed of the Proposed Rules reported in the Code of Federal Register before they take effect and is permitted to provide comments for a specific period of time. Once the comment period has expired, the Proposed Rule becomes a Final Rule with varying degrees of changes to the Final Rule. Assuming the administrative agency issuing the Final Rule was granted the authority to do so in its enabling statute, courts are likely to give wide deference to the agency’s regulations.

The FLSA was passed by Congress in 1938, and the Wage and Hour Division of the Department of Labor was created to administer the FLSA. 29 U.S.C. §204. The amendment to the salary basis test and the Final Rule in this instance is no different. The DOL published a Notice of Proposed Rulemaking (NPRM) on July 6, 2015, providing an opportunity for all who wished to comment on the proposed amendments to do so by September 4, 2015. The DOL then issued its Final Rule on May 18, 2016, having made a number of changes from the Proposed Rule to the Final Rule.

It will be interesting to see if the Texas federal court finds that the DOL has exceeded the authority granted to it by Congress, and what any appellate court rulings thereafter might be. My recommendation to employers is that they proceed with their plans to comply by December 1, 2016, and not assume this will result in them not having to do so.

South Carolina is joined by Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, Nevada, New Mexico, Ohio, Oklahoma, Texas, Utah and Wisconsin.

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Boyd B. Nicholson, Jr., Managing Director, Haynsworth Sinkler Boyd, P.A., ONE North Main, 2nd Floor, Greenville, SC 29601