During 2024 we have reported on several high-profile cases that have challenged wage-related regulations issued by the U.S. Department of Labor – including tips, independent contractors, and the white-collar exemptions to the minimum wage and overtime requirements of the Fair Labor Standards Act.
This week, a three-judge panel of the U.S. Court of Appeals for the Fifth Circuit issued a decision that could have far-reaching effects on future cases reviewing DOL regulations.
In Mayfield v. U.S. Department of Labor, the Fifth Circuit panel held that the DOL did have the authority to use a minimum salary in determining whether an employee qualified for the executive-administrative-professional, or “EAP,” exemption under the FLSA.
Plaintiff Robert Mayfield operates thirteen fast-food restaurants in Austin, Texas. He challenged the minimum salary under Trump Administration regulations issued in 2019 (and now superseded by regulations issued by the Biden Administration), arguing that the threshold “forces him to pay a higher salary to all managers regardless of performance, leaving him with insufficient funds to reward the best performers.”
According to Mr. Mayfield, the DOL had no “statutory authority” to use salary level as a factor in determining whether an employee qualifies for the EAP exemption. A federal district court in Texas ruled in favor of the DOL, and Mr. Mayfield appealed. The Fifth Circuit panel agreed with the lower court, finding that the DOL was entitled to summary judgment and affirming the lower court’s decision.
The Fifth Circuit decision
The court began its discussion by determining that Fifth Circuit precedent did not dictate the outcome in the case and that the major questions doctrine did not apply because “this case neither is one of vast political or economic significance under Supreme Court or Fifth Circuit precedent nor intrudes into an area that is the particular domain of state law.”
Loper Bright
The court then turned to whether the DOL’s use of a Minimum Salary Rule in defining an exempt white-collar employee exceeded its “statutory authority.” The Court noted that the Supreme Court’s 2024 decision in Loper Bright Enterprises v. Raimondo applied. Under that decision, the courts must
independently interpret the statute and effectuate the will of Congress subject to constitutional limits. This means that we must independently identify and respect [constitutional] delegations of authority, police the outer statutory boundaries of those delegations, and ensure that agencies exercise their discretion consistent with the [Administrative Procedure Act].
The court found that because there was “an uncontroverted, explicit delegation of authority, the question is whether the Rule is within the outer boundaries of that delegation.” More specifically, the court quoted the language in Section 213(a)(1) of the FLSA to show the explicit delegation:
Any employee employed in a bona fide executive, administrative or professional capacity…or in the capacity of outside salesman (as such terms are defined and delimited from time to time by regulation of the Secretary).
(Emphasis added.)
The question was whether the terms “define and delimit” permitted the Secretary to impose a salary level requirement for exempt status.
According to the court,
Promulgating the Minimum Salary Rule can be construed in two ways, both of which are consistent with DOL’s statutorily conferred authority. By promulgating the Rule, DOL defines, in part, what it means to work in an executive, administrative, or professional capacity (namely, to earn at least a particular amount of money) . . .. The Minimum Salary Rule can also be construed as an exercise of the power to delimit the scope of the Exemption. By promulgating the Rule, DOL sets a limit on what is otherwise defined by the text of the Exemption. On either construal of what DOL is doing when it promulgates the Rule, its action is within the scope of its authority.
Minimum salary upheld
The court then spent the rest of the opinion addressing – and dismissing – the arguments raised by Mr. Mayfield.
First, Mr. Mayfield had argued that the power to “define and delimit” is only the power to “further specify and enumerate the types of duties that qualify an employee for exemption.” In Mr. Mayfield’s view, the minimum salary level arbitrarily imposes a new requirement that lacks a textual basis because the statute only speaks of duties. The court was not persuaded and, instead, adopted the view of the DOL that “the terms in the EAP Exemption, particularly ‘executive,’ connote a particular status or level for which salary may be a reasonable proxy.” But the court found that the agency’s power to add criteria “[was] not unbounded. A characteristic with no rational relationship to the text and structure of the statute would raise serious questions. And so would a characteristic that differs so broadly in scope from the original that it effectively replaces it.”
Second, Mr. Mayfield argued that Congress knew how to impose a salary requirement when it wanted to, citing the example of the Baseball Exemption, which turns in part on whether the player surpasses a minimum weekly salary. The court rejected this argument:
The question is whether the power conferred by the explicit delegation [from Congress to the DOL] to “define[] and delimit[]” the terms of the statute allows DOL to impose a salary requirement. Even if Congress acted intentionally by omitting a salary requirement from the EAP Exemption, that does not mean that the power it conferred excludes the option of imposing the requirement.
(Emphasis added.)
The Fifth Circuit then looked to the Supreme Court’s language in Loper Bright in determining whether the court should defer to the DOL in analyzing the regulations. According to the Fifth Circuit, the DOL interpretation was the best one possible, regardless of whether deference applied:
[I]t seems that either the agency’s interpretation is the best interpretation (in which case no deference is needed) or the agency’s interpretation is not best (in which case it lacks persuasive force and is not owed deference). We need not address that issue here because DOL’s interpretation of the statute is “best” based on traditional tools of statutory interpretation and without reliance on deference of any kind.
Finally, the court rejected Mr. Mayfield’s third argument that the minimum salary requirement violated the nondelegation doctrine. Mr. Mayfield had argued that the requirement was invalid because “it lacks an intelligible principle to guide DOL’s power to define and delimit the EAP Exemption’s terms.” Although the court found that the exemption itself did provide an intelligible principle for the power to define and delimit its terms, it noted that “the lack of clarity in both intelligible principles raises reasonable concerns, but they are concerns that are only legally relevant under a theory that has been floated but never grounded in law. To require more is to ask for a level of specificity that the law does not currently demand.”
What’s next
As noted, the minimum salary being challenged by Mr. Mayfield has been superseded by Biden Administration regulations with an even higher minimum salary. Step One of the increase took effect July 1, and another increase will take effect on January 1, 2025.
Mr. Mayfield could seek review of the Fifth Circuit panel decision by all of the judges on the Fifth Circuit, or review by the U.S. Supreme Court. There are other legal challenges to the salary threshold pending, although some of those may be controlled by the Mayfield ruling.
The Presidential election in November also has the potential to affect the future of this regulation, so stay tuned.
