New Salary Rule Passes Its First Test, but Litigation Still Progresses

The Fair Labor Standards Act (FLSA) includes provisions known as the white-collar exemption, which carves out certain "executive, administrative, professional and outside sales" employees from overtime pay requirements.  It grants the Secretary of Labor the authority to "define and to limit" the exemption.  For years, the rules required employers to comply with a two-part test:  employee must perform specific duties related to their exemption category, and the employee must earn a minimum salary.  If both requirements are not met, employees must be paid overtime regardless of their title.  Effective July 1, 2024, the minimum salary required for the exemptions increased from $784.00 per week (equivalent to $35,568.00 annually) to $844.00 per week (equivalent to $43,880.00 annually).  The amounts will increase again on January 1, 2025, to $1,128.00 per week (equivalent to $58,656.00 annually). 

The salary rules issued by the Department of Labor (DOL) survived a major test before the Fifth Circuit Court of Appeals, but the issue in that case was limited to whether the DOL could consider a worker's salary at all, because the text of the statute only mentions a worker's "executive, administrative or professional" job duties.  Mayfield v. U.S. Department of Labor, No. 23-50724 (5th Cir. 9/11/24).  The court upheld the DOL's authority to set a salary threshold, but the decision did not address the amount of the salary threshold.  The ruling was quite limited, stating that DOL cannot enact rules that replace or swallow the meaning the statutory terms have, and that the text does not provide a precise line for what is permissible and what is not.  Most interpret the ruling as suggesting that a salary requirement that is too high could still be successfully attacked as not a reliable test for the duties set forth in the statute.

Groups are attacking the new salary test in various courts, including Texas and the District of Columbia.  A related overtime rule issued during the Obama Administration was set aside by a district court in Texas when a federal judge there found that the DOL exceeded its delegated authority and ignored Congress's intent "by raising the minimum salary level such that it supplants the duties test."  Thus, the ultimate outcome of the issue is still unknown, as each side in these cases view the Fifth Circuit ruling as supporting their position. 

This article is part of our November 2024 Newsletter. 

View newsletter online

Download the newsletter as a PDF