On September 11, 2024, the U.S. Court of Appeals for the Fifth Circuit joined four other circuit courts upholding the U.S. Department of Labor’s (“DOL”) authority to set minimum salary thresholds for workers to qualify for the executive, administrative, and professional (“EAP”) exemptions from minimum wage and overtime rules under the Fair Labor Standards Act (“FLSA”).
As we previously reported HERE, the DOL published its final rule to update and revise the regulations governing the EAP exemptions on April 26, 2024. The final rule, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees, raised the salary threshold for workers to qualify for an EAP exemption to $844 per week/$43,888 annually as of July 1, 2024, and to $1,128 per week/$58,656 annually effective January 1, 2025.
In Mayfield and R.U.M. Enterprises, Inc. v. U.S. Dept. of Labor, a fast-food franchise operator (“Mayfield”) sued the DOL alleging it lacked the statutory authority to define salary thresholds. Mayfield contended that the DOL’s power to set the terms of the EAP exemptions extended only to the classification of duties and any classification based on a characteristic beyond duties – including salary – would exceed the DOL’s authority. The Fifth Circuit disagreed, holding that the DOL’s final rule falls within its “explicitly delegated authority to define and delimit” the terms of the EAP exemptions.
The Mayfield court explained that, although the EAP exemptions define qualifying workers through duties and job types, the exemptions also connote a “particular status or level for which salary may be a reasonable proxy.” Because there is a strong link between the job duties identified and salary, the court found the use of the salary test permissible as an effective threshold screen for an employee’s actual duties. The court emphasized, however, that the DOL’s power to impose additional characteristics to qualify for the EAP exemption is not unlimited, noting that the characteristics must have a “rational relationship to the text and structure of the [FLSA]” and must not differ so broadly in scope from the original text that it effectively replaces it. The court did not address the specific thresholds set in the final rule.
The final rule remains effective pending a different result in other lawsuits seeking to invalidate the final rule, including two cases pending in Texas federal courts and another filed in a Tennessee federal court. Accordingly, employers must comply with the final rule’s minimum salary requirements and prepare for the second increase on January 1, 2025, by raising exempt employees’ salaries to meet the new threshold requirement, reclassifying exempt employees who fall below the threshold, and/or limiting work hours to avoid overtime requirements. As a reminder, the final rule does not replace or supersede state or local laws that set higher salary thresholds for exemption qualification.
If you need assistance to ensure compliance with the DOL’s final rule, including proper classification or reclassification of workers, please reach out to the NFC Attorney with whom you typically work or call us at 973.665.9100 or 619.292.0515.
