Appeals Court Upholds DOL’s Salary Basis Test to Set Overtime Pay Eligibility

On Sept. 11, a unanimous three-judge panel upheld the U.S. Department of Labor’s (DOL) use of a salary basis test to determine overtime pay eligibility.

With the decision, the New Orleans-based 5^th U.S. Circuit Court of Appeals “has statutory authority to impose a salary level requirement to qualify for the executive, administrative and professional (EAP) exemptions under the Fair Labor Standards Act (FLSA),” employment law firm Jackson Lewis noted in a summary of the ruling. The 5^th Circuit joins four other circuit courts of appeal in finding that the DOL is authorized to do so.

The court affirmed the dismissal of a lawsuit filed by Robert Mayfield, a fast-food franchise operator who alleged the Department of Labor “lacked statutory authority to issue a rule imposing a salary level requirement for the exemptions to apply,” wrote Jackson Lewis attorneys Justin R. Barnes, Jeffrey W. Brecher and Charles H. Wilson.

In his complaint, Mayfield also maintained that the DOL did not have authority to adopt any salary floor as a factor in defining the exemptions, as the statute defines the EAP exemptions only in terms of duties, according to Jackson Lewis, adding that the district court concluded under Chevron deference that the DOL permissibly adopted a salary minimum.

“For more than 80 years, the Department of Labor has defined the so-called White Collar Exemption in the Fair Labor Standards Act to include a minimum salary requirement,” the judges wrote. Mayfield challenged the latest rule, which updated the minimum salary required to fall within the exemption, on the ground that promulgating any rule imposing a salary requirement “exceeds [the DOL’s] statutorily conferred authority or else violates the nondelegation doctrine,” they added.

Noting that the district court granted the DOL’s motion for summary judgment, the three-judge panel affirmed the dismissal of Mayfield’s case on the basis that the 2019 minimum salary rule fell within the department’s authority to “define an delimit the terms of the exemption, and because that power is not an unconstitutional delegation of legislative power.”

Jackson Lewis summarized employers’ key takeaways from the Sept. 11 ruling, pointing out that “the 2024 minimum salary rule remains in effect, at least for now.

“Employers must continue to comply with the new minimum salary floor and prepare for a Jan. 1 increase,” the firm concluded, “by raising the salaries of exempt employees who are paid below the new floor, reclassifying those employees as nonexempt, or limiting employee hours so employees do not work overtime.”