Court denies injunction in case involving DOL salary regs
In our most recent bulletin on the new Final Rule increasing salary levels for exempt white-collar employees under the Fair Labor Standards Act, we noted that there was an additional challenge to the new regulations and that we were awaiting a decision in that case. Last week, the court in that case refused to stop the rule from taking effect.
The DOL Final Rule increased the salary level requirement to qualify for the so-called white-collar exemptions from the minimum wage and overtime requirements of the FLSA. The increase is to take place in two steps: The first step, which took effect July 1, increased the salary threshold from $35,568 a year to $43,886 a year, or $844 a week. The second step will go into effect on January 1, and will increase the threshold again to $58,656 a year, or $1,128 a week.
In Texas v. U.S. Department of Labor, a federal court temporarily enjoined the rule, but only with respect to employees of the state of Texas and its agencies. Now, in Flint Avenue v. U.S. Department of Labor, a different federal court in Texas has declined to enjoin the rule. In Flint Avenue, Judge Sam Cummings – a Reagan appointee – found that the plaintiff did not make the required showing of irreparable harm to justify immediate injunctive relief. However, he will later issue a decision on the merits of the rule, presumably before the end of the year.
Flint Avenue is a software development marketing company that has seven employees. The company alleged that under the prior rule, all of its employees were exempt from minimum wage and overtime because they were paid more than the then-current salary threshold. In its motion seeking to stop the new rule from taking effect, the company alleged that the new rule “would disqualify one of [its] junior employees from the white-collar exemption” because the junior employee did not make at least $844 a week.
According to Judge Cummings’ decision, after the lawsuit and motion for injunction were filed, the company disclosed that the employee’s salary was not high enough for her to qualify for exemption under the prior rule and gave her a backdated contract that raised her salary above the prior salary threshold.
Not surprisingly under these circumstances, the court denied the injunction. Judge Cummings agreed with the DOL’s arguments that “Plaintiff cannot manufacture the element of irreparable harm to its junior employee and then demand the extraordinary remedy of a nationwide preliminary injunction.” However, the judge found that the January 1 “step two” increase would affect the exempt status of four other employees, so he did not dismiss the lawsuit. Judge Cummings said that he would issue a ruling on the merits of the company’s case before the January 1 increases take effect.
With respect to the merits, the company has argued that the new rule improperly takes into account pay periods and salary levels rather than the job duties performed by the employees. Again, this was not the basis for the court’s refusal to issue a preliminary injunction.
We are not aware of any other motions seeking to enjoin the new salary threshold rule. But in light of the Supreme Court’s recent ruling abandoning the Chevron deference standard, other suits may be on the horizon.
