DOL will defend salary level authority in overtime appeal

In the appeal brief filed by the Department of Labor (DOL) in State of Nevada v. U.S. Department of Labor, pending in the Fifth Circuit, the DOL made it clear that, although it intends to vigorously defend its right to establish a salary level for purposes of identifying workers who are employed in a “bona fide executive, administrative, or professional capacity” (EAP) and thus exempt from the FLSA’s minimum wage and overtime pay protections, it was not going to defend the salary level set by the Obama administration in its ill-fated overtime rule.
In its brief, the DOL stated that it “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.”
The embattled final rule would have gone into effect December 1, 2016, nearly doubling the salary threshold for the executive, administrative, and professional (EAP) exemption (the so-called “white collar” exemption) at which FLSA overtime requirements would cease to apply. The rule would set the floor at $913 per week, or $47,476 annually, for full-time workers-the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region.

Court challenge

In November 2016, in State of Nevada v. U.S. Department of Labor, a Texas federal court granted an emergency motion for a preliminary injunction in a consolidated case challenging the rule brought by 21 states (and a business coalition), ruling that “Congress intended the EAP exemption to depend on an employee’s duties rather than an employee’s salary.”
The Obama-era Labor Department appealed to the Fifth Circuit and was granted an expedited appeal. Under the Trump administration, the DOL obtained a series of extensions within which to file its reply brief. In April 2016, the DOL obtained an extension moving the May 1 deadline for the reply brief to June 30. In its unopposed motion requesting the extension, the DOL noted that the due date was previously extended to “allow incoming leadership personnel adequate time to consider the issues.” At that time, the nominee for Secretary of Labor had not yet been confirmed, and so the government requested an additional 60-day extension.

Further delay

As of June 27, the DOL announced that it had sent a Request for Information (RFI) on the controversial overtime rule to the Office of Management and Budget (OMB) for review. When published, the RFI will provide a public opportunity for comment. With respect to the RFI, the DOL’s brief said that, “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.”
What the DOL did defend, however, is its authority to promulgate a salary level test for purposes of the white-collar exemption. Contesting the judge’s ruling on preliminary injunction that the statute “does not grant the Department the authority to utilize a salary-level test,” the DOL argued that rationale was foreclosed by the Fifth Circuit’s decision in Wirtz v. Mississippi Publishers Corp., which expressly upheld the Department’s use of a salary-level test. “That holding has ample support in the text, purpose, and history of the EAP exemption, and Congress acquiesced in the Department’s approach by amending the EAP exemption without altering the Department’s regulations,” the brief argues.
In addition, the DOL pointed out that although the business association’s challenge to the Obama-era final rule included objections to the particular salary level ($913 per week) set by the 2016 regulations and to the particular methodology used to arrive at that amount, the district court had not addressed those specific objections. Neither should the Fifth Circuit, said the Department, urging instead that the court “simply lift the cloud created by the district court’s broad reasoning, which would call into question any salary-level test adopted by the Department.”

Reaction

Responding to the DOL’s brief, the left-leaning Economic Policy Institute (EPI) noted that “DOL has used salary as well as duties to determine overtime eligibility since 1938, and it would have been an abandonment of the agency’s responsibility to U.S. workers to have abdicated this authority.” The EPI took issue with the DOL’s unwillingness to defend the salary threshold it had adopted in the final rule, saying that “the Trump administration is defending the agency’s authority to establish an overtime threshold in order to issue a new rule that hurts working [people] and weakens overtime protections.”
The Competitive Enterprise Institute took the opposite tack, saying that “today’s decision by the Trump administration to not defend the Obama administration’s job-killing mandate on overtime pay is a much-needed step toward repealing the misguided regulation, building on the Labor Department decision earlier this week to start work on a new, less onerous rule on overtime pay. …The way to help workers increase financial security and improve job opportunities is to lift heavy-handed government mandates off of America’s job creators.”
Jeffrey W. Brecher, Principal and Practice Group Leader of Jackson Lewis’ Wage and Hour Practice Group, had a more measured response. “The DOL’s brief states it is not going to issue a proposed rule until the litigation is resolved. So it could be some time before a new rule is issued. If the Fifth Circuit reverses, it is possible the preliminary injunction will be lifted and the salary level will go into effect (and possibly retroactive to the December 1, 2016, original effective date). However, the district court could also continue the injunction based on different grounds-i.e., that the salary level set by the Rule was arbitrary, an issue the DOL has specifically asked the Fifth Circuit not to address.” He concluded, “there are no clear answers at this point.”

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