218 F. Supp. 3d 520
E.D. Tex.2016Background
- In 2016 the DOL issued a Final Rule raising the salary threshold for the FLSA EAP (white-collar) overtime exemption from $455/week to $921/week and creating an automatic triennial update mechanism; effective Dec. 1, 2016.
- Nevada and 20 other states (State Plaintiffs) sued under the APA challenging the Final Rule’s salary-level increase and automatic update; they moved for a preliminary injunction to block implementation.
- The Business Plaintiffs’ parallel suit in the Eastern District of Texas was consolidated for overlapping issues and considered by the court.
- The State Plaintiffs contend the Final Rule unlawfully supplants the duties-based EAP exemption with a salary-only (or salary-dominant) test and that the automatic update violates APA notice-and-comment requirements.
- The DOL defended the rule under its delegated authority to “define and delimit” the EAP exemption and argued Chevron deference applies; it disputed standing/irreparable harm only minimally.
- The district court held a preliminary injunction hearing and granted a nationwide injunction enjoining implementation and enforcement of the Final Rule pending further order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the DOL exceeded statutory authority by setting a minimum salary that effectively supplants the duties test | Salary threshold and automatic update exceed the statute; §213(a)(1) is duties-based and unambiguous (no salary supplanting) | Statute delegates authority to define/delimit EAP; salary threshold is a permissible regulatory tool—Chevron deference applies | Court: §213(a)(1) is plain and duties-focused; Final Rule exceeds delegated authority and is unlawful (no Chevron deference) |
| Whether the automatic updating mechanism violates the APA | The update (triennial, percentile-based) unlawfully changes obligations without new notice-and-comment | Update is within DOL’s rulemaking authority and is part of the Final Rule | Court: Because the Final Rule is unlawful, DOL lacks authority to implement the automatic update; challenge need not be decided separately |
| Whether States have Article III standing and ripeness to challenge the Final Rule | States face imminent, traceable monetary injury and program disruption; challenge is ripe because rule is final and creates legal obligations | Defendants did not contest standing; argued some claims (updates) not ripe | Court: States have standing; rule is final and ripe for review |
| Whether preliminary injunction factors are satisfied (irreparable harm, balance, public interest) | Enforcement will cause irreparable budgetary harms, program disruption, layoffs, and unrecoverable costs; nationwide relief is needed to preserve uniformity | Injunction would delay benefits to misclassified workers and DOL’s regulatory aims | Court: All four factors met—likelihood of success on merits, irreparable harm, balance favors plaintiffs, public interest favors preserving status quo; nationwide injunction granted |
Key Cases Cited
- Clapper v. Amnesty Int’l USA, 568 U.S. 398 (standing requires imminent, traceable, redressable injury)
- Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528 (Congress may apply FLSA to states under Commerce Clause)
- Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (two-step agency deference framework)
- Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7 (standard for preliminary injunction; irreparable harm requirement)
- Bennett v. Spear, 520 U.S. 154 (definition of final agency action)
- Auer v. Robbins, 519 U.S. 452 (deference to agency interpretations of its own regulations)
- MCI Telecommunications Corp. v. American Tel. & Tel. Co., 512 U.S. 218 (agencies may not adopt interpretations that exceed statute’s meaning)
- King v. Burwell, 576 U.S. (courts scrutinize agency interpretations on issues of deep economic and political significance)