11/16/2016

By: Brittany Flaherty Theis

The Fair Labor Standard Act (“FLSA”) exempts certain executive, administrative, and professional (“EAP”) employees from the overtime requirements of the FLSA, which are commonly known as either the EAP exemptions or the “white collar” exemptions. To qualify for the exemption, an employee must meet the salary basis, salary level, and primary duties tests. Employers do not need to pay overtime (one and one half times their regular rate of pay for time worked beyond 40 hours in a work week) to employees that pass all three tests because such employees are exempt.

In 2014, President Obama ordered the U.S. Department of Labor (“DOL”) to revise federal regulations pertaining to the white collar exemptions. On May 18, 2016, President Obama and the DOL announced the publication of the DOL’s final rule updating the overtime regulations (the “Overtime Rule”).

On September 20, 2016, the State of Nevada, joined by 20 other states, filed a lawsuit in a federal district court in Texas (referred to herein as the “States’ Lawsuit”). The States’ Lawsuit challenges the DOL’s Overtime Rule arguing that the new rule simply doubled the current salary basis test and rendered the inquiry of whether an employee is actually working in an executive, administrative, or professional capacity “virtually irrelevant.” The States’ Lawsuit also argues that the automatic indexing provision, which escalates the minimum salary automatically, evades the statutory language of the FLSA and the Administrative Procedure Act, ignores the DOL’s prior position that nothing in the legislative history would support automatic increases, and exceeds the DOL’s Constitutional authority. The Plaintiff States argue that the Overtime Rule will increase their employment costs significantly, and that because they “cannot reasonably rely upon a corresponding increase in revenue, they will have to reduce or eliminate some essential government services and functions.”

Also on September 20, 2016, the U.S. Chamber of Commerce, 17 other Chambers of Commerce, and numerous additional business organizations filed a lawsuit against the DOL (referred to herein as the “Business Coalition Lawsuit”) in which they complain that the Overtime Rule will result in millions of employees across the country being reclassified as hourly workers – resulting in restrictions on their work hours that will deny them opportunities for advancement and hinder the performance of their jobs. The Business Coalition Lawsuit challenges the Overtime Rule arguing that it exceeds the authority of the DOL and is arbitrary, capricious, and contrary to the procedures required by law. It also argues that the new salary threshold is so high that it is no longer a plausible proxy for the categories exempted by Congress (the executive, administrative, professional, and computer employee exemptions). The complaint takes issue with what it calls the “unprecedented ‘escalator’” provision, which increases the minimum salary over time, arguing that the provision departs from the terms of the FLSA and does so without the additional notice and comment that are required by the Administrative Procedures Act.

The States’ Lawsuit and the Business Coalition Lawsuit have been consolidated. Plaintiffs filed an Emergency Motion for Preliminary Injunction and a Motion for Summary Judgment. The parties have been filing briefs regarding those motions, but as of November 15, 2016, no order had been issued.

Whitt Law advises its clients regarding wage and hour requirements under Illinois law and the FLSA. Our attorneys will be monitoring these cases for their impact on the new Overtime Rule and its implementation. If you have questions regarding an employee within your organization or have questions about the FLSA more generally, please contact Whitt Law Attorney Brittany Flaherty Theis.

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