Federal Appellate Court Upholds DOL’s Authority to Use Salary Test for Overtime Exemption.

The U.S. Court of Appeals for the Fifth Circuit upheld the authority of the U.S. Department of Labor to define the terms of the overtime exemption under the Fair Labor Standards Act, including the salary requirement. Although the decision, Mayfield v. U.S. Dept. of Labor, reviewed that 2019 regulatory changes, the ruling significantly bolsters the DOL’S position that it has the authority to increase salary levels required to meet the overtime exemption. Thus, for now, the DOL’s most recent increase of the salary level to meet the overtime exemption will remain in place (other than for the State of Texas, which won an injunction of the rule as to state government employees, as discussed in our July 1, 2024 E-lert).

As most employers should be aware, the FLSA requires covered employers to pay employees time-and-a-half of the employee’s regular rate for hours worked over 40 hours in a week, unless the employee falls within a bona fide executive, administrative, or professional (“EAP” or “white-collar”) exemption. In order to meet the exemption, a white-collar employee must meet three tests: (1) the employee’s primary duties must meet requirements specific to the EAP exemption in question; (2) the employee must be paid on a salary basis; and (3) the employee’s salary must be at least a certain amount per week. Most recently, the DOL issued a rule, effective July 1, 2024, that raised the required weekly salary from $684 to $844 (or $43,888 annually), with a further increase on January 1, 2025 to $1,128 per week (or $58,656 annually).

What this means for employers is that, in the context of similar challenges to the 2024 rule, a generally reliably employer-friendly federal appellate court, which has enjoined a number of other agency rules, is not likely to overturn the 2024 rule.