FLSA Salary Level Test Rule Invalidated

hey everybody we are back in the Shany on a cloudy Saturday morning in November on the upside it is 50 degrees outside which isn't bad for the middle of November why are we in the Shanny on a Saturday we're in the Shanny on a Saturday because on Friday the district court down in Texas that was hearing the do's 2024 salary level rule case issued an order and decision the order and decision for those of you that were worried about what was going to happen on January 1st is good for you because what the judge did in a 67 I think some page decision was he vacated the rule Nationwide for everybody said the rule is AEL it doesn't go into effect and he did that for a couple of reasons that we're going to talk about here but before we get into that let's start with what was the rule going to do well the rule had three stages as you all might remember the first stage of which occurred back in July of this year on July 1st of 2024 the salary level test and remember we're talking about the salary level test we're not talking about the duties test although the judge talked about the duties test a lot nor are we talking about the salary basis test those are still there they haven't changed nothing in the rule was going to change them nothing in this decision changes them we're talking about the salary level test and what uh what was going to happen in the rule what happened on July 1 2024 was the salary level went from the 684 a year which is about $35,000 in change up to $844 so before Friday that's what the salary level test was in the United States then there was two more parts to that rule on January 1 of 2025 the salary level is going to go up again from 844 to 1,128 and then on July 1 of 2027 and every 3 years thereafter there was going to be an automatic increase in the salary level based on a formula that was written into the into the rule about how these things were going to go up again the judges opinion was 67 pages long he was clearly thinking about an appeal um there is a lot of Statistics in this opinion he does a really good job of hoisting the do on its own patard in that he quotes a do from 2019 quite a bit remember that's the Trump Administration rule that raised the salary level to what it currently is now that rule was deemed to be valid um and he goes back to the 2016 rule quite a bit but so basically what the judge did was let me boil it all down for you and tell you what the judge did basically what the judge did was this first of all he said look he goes through this long history gives the entire history of the salary level test from the do Under the flsa starting with the first increase right up to the this last one and he explains what they did and how they did it and makes reference to reports and studies and all kinds of stuff there's charts there's graphs there's the opinion was clearly drafted with like I said an appeal of mind but the first thing he did is he said look you can have a salary level test even though the statute only speaks in terms of Duties you can have a salary level test now the judge didn't have any choice he had to do that because just recently the fifth circuit in a case called Mayfield said that a salary level test was okay but what the fifth circuit said in that case which is where this Texas Court sits in the fifth circuit was you could have a sary level test but it it's not unbounded it doesn't give the do absolute authority to do whatever they want and what the Mayfield Court basically said and I told you when we talked about that was they had given this judge kind of a road map for how to invalidate this rule what the Mayfield Court basically said was you can't have a salary level test that subsumes the duties test because what the statute provides for is a duties test for Executive Administrative and professional employees and now we've got of course computer employees in and um outside salespeople but what the Court's talking about here really is Executive Administrative and and um professional employees so you could have this salary level test but it can't consume consume the duties test and make it a nullity the do has the authority under the statute that has been given to them by Congress to Define and Del liit the rules for this exemption now the court says Define and Del liit is not an absolute right to do whatever you want there's boundaries to that all right the do's the court said the do's set the salary so high in this rule that it basically does what Mayfield says it can't do it eliminates the duties test as a real test of whether somebody is an Executive Administrative or professional employee in fact what the court basically said was you did the same thing that you did in 2016 remember the 2016 rule was promulgated by the Obama Department of Labor you did the same thing you did in 2016 that we found this very Court found to be invalid back in 2016 you can't do that all right now that 2016 rule never got appealed for the same reason this rule isn't going to get appealed because there was an administrative change in the Trump Administration came in they dumped the 2016 rule put the 2019 rule in which is a rule that's going to be in place after this is gone so what you did do was you set this level so high and they talk about 20th percentile and 10th percentile and 35th percentile of salaried workers in the lowest paid region in the United States none of that matters the court basically said you set this level so high that you have eliminated effectively the duties tests for millions and millions and millions of workers in this case it was something like 4 million total between the two jumps and the test and this is Chevron deference coming back to Roose this is the court saying we don't have to give you Defence for these decisions we have to look at this and decide whether or not you are effectuating the purposes of Congress in the statute and the court said you didn't now what about these automatic kickers the court also found the automatic kicker to be a problem but for an entirely different reason they probably could have found that it also subsumes the duties test and the rule but what they really what what the court found here was look the other thing you can't do is you can't ignore your duties under the administrative procedure act and under the administrative procedure act when you administrative agency the Department of Labor promulgate a rule like this you have to do what's called notice and comment Ru making that is you publish a proposed rule you allow people to comment on the rule you take the comments you digest them you make changes to the rules if that's necessary based on the comments and then you put a final rule in place that's what happened here but it isn't going to happen with the automatic kicker said the court you in in July 1 of 27 2027 based on a mathematical formula with no publication no notice no opportunity to comment the salary level is going to go up again and that they said was improper now then the court spent quite a bit of time talking about all right what's the appropriate remedy here you'll remember back in you might not remember but back in 2016 when this became an issue this very same court issued a nationwide injunction prohibiting the rule from going into place this time the court didn't do that that's why a bunch of you had to make salary changes in July this court only enjoyed the rule for going into place for the State of Texas as an employer because the state of Texas was the plaintiff there are now more plaintiffs in the case but that's not the point the court then said what's the appropriate rule here do I just fashion a remedy for the named plaintiffs or do I fashion or remedy for the entire United States and they spent a great deal of time discussing the fact that this rule is illegal on its face the do doesn't have the authority to do this which means it's illegal for everybody not just the people that sued so the court vacated the rule with Nationwide off effect for everybody in other words the rule is now a nullity it doesn't exist unless an appellant Court comes in and says it does so the rule is gone all right so what does that all mean what it means is that we are now the the salary level test in the United States of America is now 684 a week which is about 30 let me look 35,000 in change a year and the highly compensated salary level is 17452 which is what it was before July 1 of this year of 2024 and now I know what you're saying you're saying wait a minute I give some people raises so that they could remain salaried exempt employees yes you probably did and now it turns out you probably didn't have to give those I mean you did because the rule was in place but the rules not there anymore and now there's a gap between what you have to pay and what you actually are paying and the next question that's going to come out of all your mouths is can I cut all those people's pay I'm going to say to you is slow your roll a little bit I've said that a lot lately in that you're going to want to talk to one of us or your employment and labor lawyer before you start cutting people's pay willy-nilly because there's consequences for doing that you know that and even if there might not be legal consequences and I'm not saying there are there aren't there rules about cutting people people's salary and keeping the um salary level and salary basis test intact there's there's regulations on that um you you're going to have employee relations issues if you go ahead and do that too so think about it before you do it that's all we got I know that's good news for some of you because some of you were worried about this next level and the first one wasn't second a big deal and it didn't affect that many people according to the do about a million people across the nation but this one was going to affect a lot according to the do about 3 million Across the Nation well now you don't have to worry about it and there's your early New Year's present see y'all next time