DOL can set salary threshold for overtime, court rules

The 5th U.S. Circuit Court of Appeals has affirmed the Department of Labor’s (DOL) authority to use salary levels as a criterion for determining overtime pay eligibility.

The decision upholds the DOL’s 2019 rule that raised the minimum salary threshold for exemption from overtime pay under the Fair Labor Standards Act (FLSA).

The case, Mayfield v. U.S. Department of Labor, challenged the DOL’s longstanding practice of including a salary test in defining the “white collar” or executive, administrative, and professional (EAP) exemptions to overtime pay requirements.

Plaintiff Robert Mayfield, a fast-food chain operator based in Texas, sued the Labor Department in 2022. His lawsuit challenged the 2019 rule that raised the minimum salary threshold to $35,500, arguing that the DOL did not have the right to set a salary test.

Unanimous decision

Judge Jennifer Walker Elrod wrote for the unanimous three-judge panel, emphasizing the DOL’s consistent application of this authority over decades. She noted that the DOL has been promulgating the rule since “immediately after the FLSA was passed.”

The court’s decision addressed the recent shift away from Chevron deference, referring to the U.S. Supreme Court’s June 2023 ruling in Loper Bright Enterprises v. Raimondo. “We need not address that issue here because DOL’s interpretation of the statute is ‘best’ based on traditional tools of statutory interpretation,” Elrod wrote.

She highlighted congressional acquiescence to the DOL’s authority, saying, “Congress has amended the FLSA numerous times without modifying, foreclosing, or otherwise questioning the Minimum Salary Rule.”

Challenges to 2024 rule remain The 5th Circuit’s ruling is significant as it comes amid challenges to the Biden administration’s new overtime rule, issued April 2024, that again raises the minimum salary threshold. At least three challenges are underway in federal courts.

Starting from July 1, 2024, workers earning less than $43,888 annually qualify for time-and-a-half overtime pay. The threshold will then increase to $58,656 on January 1, 2025. Under the rule, that threshold will increase every three years based on wage data.

Estimates suggest the 2024 rule is expected to make another four million employees entitled to overtime compensation under the FLSA.