On September 11, 2024, the United States Court of Appeals for the Fifth Circuit issued its opinion in Mayfield v. Department of Labor, upholding the authority of the Department of Labor (“DOL”) to establish a minimum salary level for the white-collar exemption for overtime eligibility.
The white-collar exemption excludes employees in bona fide executive, administrative, or professional roles from being subject to the overtime requirements of the Fair Labor Standards Act (“FLSA”). Qualifying workers under the exemption are defined based on their duties and job types, though the DOL has historically issued a minimum salary requirement that prevents employees from qualifying if their salary falls below a specified level. In justifying its use of a salary level test, the DOL takes the position that the terms of the white-collar exemption connote a level of status and prestige for which salary can be a reasonable proxy and that salary can be an effective reflection of an employee’s actual job duties.
Though the DOL recently issued a final rule raising the white-collar exemption minimum salary (see our coverage here), the basis of this litigation was a challenge to the DOL’s increase to the minimum salary in 2019. At that time, the DOL raised the threshold required to qualify under the white-collar exemption from $455 per week to $684 per week. The plaintiff, a small business owner, argued that the DOL lacked the requisite statutory authority to define the terms of the white-collar exemption by salary level rather than solely by job duties.
Turning to the Supreme Court’s recent opinion in Loper Bright Enterprises v. Raimondo, the Fifth Circuit panel stated its duty to “independently interpret the statute and effectuate the will of Congress subject to constitutional limits.” Because Congress provided an “explicit delegation of authority” in the FLSA for the DOL to “define” and “delimit” the terms of the white-collar exemption, the court’s analysis turned on whether the 2019 rule was within the “outer boundaries of that delegation.” The court found that the use of salary level as a proxy for white-collar status is permissible as it has a “strong[] textual foundation” and “the link between the job duties identified and salary is strong.” However, the court clarified that its holding “does not mean . . . that use of a proxy characteristic will always be a permissible exercise of the power to define and delimit,” noting that “[i]f the proxy characteristic frequently yields different results than the characteristic Congress initially chose,” the proxy is inappropriate.
The DOL will likely rely on this ruling to defend the several pending legal challenges to the latest increases to the minimum salary exemption, which raise the minimum salary to $844 per week effective July 1, 2024 and to $1,128 per week effective January 1, 2025. A federal district court in Texas granted a limited injunction blocking enforcement of that rule against the state of Texas while another federal court in Texas refused to enjoin the application of the rule to other employers as the lawsuit continues. Any decision on the 2024 rule is sure to be appealed to the Fifth Circuit where the limits of the Mayfield decision, and any subsequent review by the United States Supreme Court, are sure to be tested.
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