A trio of cases before the United States Court of Appeals for the Fifth Circuit have challenged the core of US Department of Labor rulemaking. With varying levels of success. Restaurant Law Center v. DOL pertains to the DOL’s (Biden era) tip credit rules. Mayfield v. DOL and Texas v. DOL pertain to the DOL’s overtime rules promulgated during the Trump and Biden administrations, respectively.
In Restaurant Law Center, the Fifth Circuit issued an Opinion on August 23, 2024, striking down a Biden-era update to the Tip Credit Rule. The Rule classifies “tipped employees” for purposes of determining when an employer is allowed to take a tip credit. The Biden Rule would have narrowed the instances when an employer could take a tip credit. The district court originally granted summary judgment in favor of DOL, finding that the Chevron doctrine permitted DOL. The Fifth Circuit reversed. The Fifth Circuit found that DOL’s Final Rule on “tipped employees” directly violated explicit statutory language in the FLSA. More telling, the Fifth Circuit found that the FLSA did not provide any “direct” statutory authority permitting DOL to draw a line between different types of employees. The Court reasoned that, under the Supreme Court’s recent decision in Loper Bright v. Raimondo, the DOL lacked the authority under the FLSA even to consider what “occupations” could be subject to the Rule.
Mayfield dealt with an overtime rule promulgated during the Trump administration. The appellant challenged the DOL’s authority to set salary thresholds for determining overtime eligibility. The district court had granted summary judgment in favor of the DOL. On September 11, 2024, the Fifth Circuit affirmed. The unanimous panel held that salary level distinctions are part of the “broader scheme” of the FLSA. The Court also rejected the employer’s argument that the salary threshold is a “major question” that only Congress can decide.
In Texas, which is still pending in the Fifth Circuit, the district court granted summary judgment in favor of Texas for public employees regarding the DOL’s more recent (Biden era) overtime rule. That rule purports to automatically raise salary thresholds approximately every three years under a stated formula. The district court found that the DOL did not go through the proper rulemaking procedure and lacked statutory authority to index salary thresholds. The district court’s injunction only reaches public employees in Texas.
The Fifth Circuit would historically have been viewed as a favorable venue for hearing the appeal in Texas. But the Court of Appeals may have signaled in Mayfield that Texas will have an uphill battle challenging the Biden Overtime Rule. The outcome remains to be seen.
