Earlier today Judge Amos L. Mazzant, United States District Court Judge in the Eastern District of Texas issued an order preventing the Department of Labor (“DOL”) from enforcing its Final Rule with respect to the salary increase for white collar exempt employees. The Final Rule required employers to pay a minimum salary of $913 per week or $47,476 per year to exempt employees.
In issuing this order, the court referred directly to the exemption found in the Fair Labor Standards Act (“FLSA”). The law expressly states that the terms executive, administrative, or professional may be “defined and delimited from time to time by regulations of the Secretary, subject to the provisions of the Administrative Procedure Act.” (29 U.S.C. § 213(a)(1).) The Court concluded that the DOL exceeded its authority which is limited to establish the types of duties that would qualify an employee for the exemption, and not to modify the salary level. Because the Final Rule increased the salary test, it was “directly in conflict with Congress’s intent.
The Court also concluded that because the Final Rule is unlawful, the DOL also lacks authority to implement the automatic updating mechanism.
What does this mean for employers? The federal rules on overtime for the white collar exemptions will not change on December 1, 2016. The salary test remains at $455 per week.
Of course, California employers must still comply with state laws. The salary test in California is two times minimum wage. Currently minimum wage is at $10 per hour. Therefore, the annual salary threshold is $41,600. On January 1, 2017, the minimum wage for employers of 26 or more employees rises to $10.50. This makes the annual salary threshold for employers of 26 or more $$43,680. For smaller businesses the annual salary threshold remains at $41,600.
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