DOL Posits Texas Court Erred in Ruling DOL Lacked Authority to Set Minimum Salary for Exempt Employees

   By Karen L. Piper

In May, 2016, the U.S. Department of Labor (“DOL”) announced its new rule increasing the minimum salary required to be paid to employees to be exempt from the Fair Labor Standards Act’s (“FLSA”) overtime pay obligations.  The increased minimum salary of $913 per week was scheduled to take effect on December 1, 2016.  A group of states, including Michigan, filed a lawsuit in the federal district court for the Eastern District of Texas challenging the DOL’s authority to set a minimum salary level for exempt employees.  The Texas federal court ruled on November 22, 2016 that the minimum salary requirement was unlawful: The FLSA “does not grant the Department [of Labor] authority to utilize a salary level test.”  The court enjoined the DOL from enforcing the new minimum salary.

On December 1, 2016 the DOL appealed this ruling to the Fifth Circuit Court of Appeals (covering Texas, Mississippi and Louisiana).  The DOL filed its brief in support of its appeal on December 15, 2016.  The state-plaintiffs defending the injunction filed their response on January 17, 2017.  On January 20, 2017 President Trump was inaugurated.  On January 25, 2017, the DOL requested and was granted the first of several extensions of time for filing its reply brief.  On Friday, June 30, 2017, the DOL filed its reply brief in support of its appeal of the injunction that had suspended enforcement of its May 2016 overtime rule.

In its reply brief, the DOL argued that the district court erred in ruling it lacked the authority to establish a minimum salary test for exempt employees.  The DOL noted that it had included a minimum salary test for exempt employees from the FLSA’s inception in 1938.  Its most recent increase before 2016 was adopted in 2004.  If the 2016 increase in the minimum salary level was illegal, so was the 2004 increase to $455 per week.

The DOL noted that the Fifth Circuit Court of Appeals had ruled on the issue of its authority in 1966.  At that time, the Fifth Circuit ruled the minimum salary level test was legal. Wirtz v Mississippi Publishers Corp, 364 F.2d 603 (5th Cir. 1966).  The Wirtz opinion written by then-Judge Warren Burger said, in part, “[e]very circuit [court] to consider the issue has upheld the salary-level test as a permissible component of the EAP [Executive, Administrative, Professional] regulations.” DOL brief at p. 10.  Even the United States Supreme Court has approved the DOL’s requirement of a minimum salary for exempt employees. DOL brief at p. 11, citing Auer v Robbins, 519 U.S. 452 (1997).  The DOL argued that the district court erred in ruling otherwise.

The DOL observed that the district court did not rule that the $913 per week salary level was arbitrary and capricious or unsupported by the administrative record; only that the DOL lacked authority to set a minimum salary level for exempt employees.  The DOL did not advocate to keep the $913 per week minimum salary level because it “intends to undertake further rulemaking to determine what the salary level should be” once the litigation is concluded. DOL brief at p.17.  The DOL is not going to initiate rulemaking on what the minimum salary level should be until the issue of its authority to establish a minimum salary level is settled.  In the meantime, the DOL “soon” will publish a “request for information seeking public input on several questions that will aid in the development of a proposal” on the “appropriate” salary level. DOL brief at p. 18.

The Fifth Circuit Court of Appeals had originally indicated that it would schedule oral argument on the DOL’s appeal as soon as possible following the filing of the DOL’s reply brief.  To date, the Fifth Circuit has not scheduled oral argument.

At the moment, based on the Texas federal court’s order, the DOL cannot enforce the $913 per week minimum salary.  For further information and updates check with employment counsel, such as the author.

This article was written by Karen L. Piper, who is Secretary of the Board of Detroit SHRM, a member of the Legal Affairs Committee, and a Member of Bodman PLC, which represents employers, only, in Workplace Law. Ms. Piper can be reached at Bodman’s Troy office at (248) 743-6025 or kpiper@bodmanlaw.com.  For further information, go to:  http://www.bodmanlaw.com/attorneys/karen-l-piper.

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