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November 23, 2016

Department of Labor's Final Rule Increasing Salary Threshold for White Collar Exempt Employees Will Not Take Effect on December 1st, As Originally Planned

Just as commentators, political pundits and Vegas odds makers were surprised by the recent Presidential election results, the legal world was surprised late yesterday by Federal Court Judge Amos L. Mazzant's decision blocking the Department of Labor's Final Rule related to the salary test for white collar exempt employees from taking effect, as planned, on December 1st (the "Final Rule").  As we previously reported in our November 18th "Off the Clock" blog post, twenty-one states, as well as the U.S. Chamber of Commerce and other business groups, had filed an emergency action in federal court seeking to enjoin the Final Rule.
In his decision, Judge Mazzant ruled that the Department of Labor exceeded its authority and ignored Congressional intent when it published its Final Rule raising the minimum salary level from $23,660 annually to $47,476 annually.  In addition, the Court ruled that the Department of Labor lacked authority to impose the automatic salary increase provision found in the Final Rule, which would first take effect in January 2020.  The practical import of the Judge's decision is that the Final Rule is currently frozen and, therefore, will not be enforced by the Department of Labor.  Thus, the current salary threshold of $455 per week (or $23,660 annually) remains in effect for white collar exempt employees under the Fair Labor Standards Act ("FLSA"). 
Procedurally, issuance of an injunction does not end the case that was filed by the states and business groups.  The Department of Labor could continue to pursue the case to seek a final ruling.  The likelihood of the Department of Labor, however, securing a reversal of the decision in the Federal District Court that preliminarily enjoined the Final Rule, before appellate review, is virtually non-existent.  
Notably, although the action was filed by only 21 of the 50 states, the Judge's injunction has nationwide effect and applies to both private and public-sector employers alike. 
As has already been widely reported in the press, many employers within the United States had already implemented salary increases in anticipation of the December 1st effective date.  Those employers are now faced with the business decision as to whether to honor those increases or roll back the salary increases in light of the change in the law.  Any such roll back would certainly have a negative impact on employee morale. 
To be sure, Judge Mazzant's decision will not be the last chapter written with respect to whether the salary threshold should be increased for white collar exempt employees under the FLSA.  The Court's decision makes clear that such an increase is in the province of Congress.  As such, there will almost certainly be legislation filed in the coming months aimed at accomplishing what the Final Rule had intended to accomplish.  In addition, once President-elect Trump assumes office, his administration's priorities will shape future rulemaking efforts within the Department of Labor.  For now, however, employers can be certain that the current salary threshold for white collar exemption remains unchanged, and no action is required to attempt to comply with the now-enjoined Final Rule.
We will continue to monitor developments under the Fair Labor Standards Act and will provide timely updates.  If you have any questions concerning this issue or any other employment-related matter, please contact one of our Labor, Employment and Employee Benefits attorneys.

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Mirick O'Connell is a full-service law firm with offices in Worcester, Westborough and Boston, Massachusetts.  The Firm's principal practice groups include Business;
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