Employers across the nation have been preparing to increase salary levels for managers to meet the higher salary level requirements implemented by the Department of Labor earlier this year under the Fair Labor Standards Act (FLSA). The DOL rules were set to take effect on December 1, 2016, and require that employers must pay employees that qualify to be exempt executive, administrative or professionals (referred to as the “EAP” exemption) a minimum salary level of at least $921 per week or $47,892 annually. 21 states filed a lawsuit to prevent the DOL’s rule to take effect, arguing that in raising the minimum salary level, the DOL exceeded its delegated authority from Congress. While not issuing a final ruling, the court determined that the plaintiff states have shown a likelihood of success on the merits justifying the preliminary injunction. The merits of the case and a final determination will be made at a later date.
Therefore, the court issued an injunction preventing the DOL’s overtime rules from taking effect on December 1, 2016. An issue addressed by the court was whether the injunction applied only to the 21 states involved in this case, or to all states. The court’s opinion is unambiguous that the scope of the injunction applies to all states and all employers:
A nationwide injunction is proper in this case. The Final Rule is applicable to all states. Consequently, the scope of the alleged irreparable injury extends nationwide. A nationwide injunction protects both employees and employers from being subject to different EAP exemptions based on location.
Now employers that started the process of raising salary levels for managers in order to comply with the DOL’s overtime rules must make a decision to continue with the raises or hold back on any implementation until there is further guidance from the courts. It is also likely that President-elect Trump’s administration will not look favorably on the DOL’s overtime rules. This adds further uncertainty about whether the increase in the salary level will ever go into effect once President-elect Trump takes office.
Employers also need to remember that the minimum salary requirement is only one part of the exemption test, and California employers need to ensure that they are still complying with California’s requirements.