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Home | BakerHostetler

Fifth Circuit Upholds DOL Authority to Set Minimum Salary Threshold for EAP Exemption from FLSA Overtime Requirements

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Fifth Circuit upheld DOL’s ability to consider a worker’s salary level when determining whether the worker is exempt from FLSA’s overtime requirements.

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Court considered 2019 Trump administration rule; decision is likely to bolster DOL’s most recent salary level adjustments under 2024 Biden administration rule.

This means that at least for now, new DOL salary thresholds remain in place.

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In a follow-up to our previous client alerts on the U.S. Department of Labor (DOL) issuing a <a href="https://www.bakerlaw.com/insights/breaking-news-dol-unveils-final-ot-rule-significantly-raising-salary-thresholds-for-exemptions/" target="_blank" rel="noreferrer noopener">new overtime exemption rule</a> and <a href="https://www.bakerlaw.com/insights/unless-you-are-the-state-of-texas-as-an-employer-salary-changes-to-the-department-of-labors-dol-overtime-rule-took-effect-today/" target="_blank" rel="noreferrer noopener">legal challenges to the new rule</a>, a three-judge panel on the Fifth Circuit found that the DOL was within its authority under the Fair Labor Standards Act (FLSA) when it issued a 2019 rule limiting employees who are exempt from the FLSA’s overtime requirements to those making at least $35,568 annually.

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In <a href="https://admin.bakerlaw.com/wp-content/uploads/2024/09/bfAC.pdf" target="_blank" rel="noreferrer noopener">Mayfield v. DOL</a>, the court found that the major questions doctrine did not apply to its analysis in this case because the implications of the 2019 rule did not meet the threshold for political or economic significance and did not seek to regulate a significant portion of the American economy, as the 2019 rule removed from the exemption only a “small percentage of the overall workforce” who would otherwise be exempt. The court also found that the DOL had claimed authority to regulate the exemption using a minimum-salary rule continuously since the FLSA was enacted in 1938.

Applying the U.S. Supreme Court’s recent decision in Loper Bright v. Raimondo, the court found that there was an explicit delegation from Congress to the DOL that gives the agency authority to “define and delimit” the terms of the executive, administrative and professional (EAP) exemption, and that setting a minimum salary level falls within the scope of that authority, as salary level is a reasonable proxy for the job duties identified in the exemption. The court rejected the employer’s argument that imposing a minimum salary level fell outside the scope of the DOL’s delegated authority because Congress acted intentionally to omit a salary requirement from the EAP exemption, finding that (1) Congress did not exclude the power to impose such a requirement from its delegated authority and (2) Congress had acquiesced to that delegation of authority by amending the FLSA numerous times without modifying, foreclosing or otherwise questioning the minimum salary rule. Additionally, the court said that the DOL’s authority to issue a minimum salary rule was not an unconstitutional delegation of power because Congress provided at least two principles to “guide and confine” the agency.

The DOL is currently facing three challenges to the Biden administration’s 2024 rule, which sets the minimum salary threshold for EAP exempt workers at $844 per week (equivalent to $43,888 per year), which will increase to $1,128 per week (equivalent to $58,656 per year) on January 1, 2025. This rule is expected to affect millions more workers, which may influence courts’ decisions as to whether the agency seeks to regulate a significant portion of the American economy under the major questions doctrine. Nevertheless, the DOL is expected to rely on the Fifth Circuit’s decision in defending the 2024 rule.

BakerHostetler’s Labor and Employment team is composed of dozens of experienced individuals prepared to assist and advise businesses in light of the DOL’s 2024 rule as businesses work to stay in compliance with the ever-evolving regulatory landscape. If you have any questions about this alert, please feel free to contact any one of our experienced professionals.

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