Fifth Circuit Upholds Labor Department’s Authority on Overtime Pay Exemptions

On Sept. 11, the U.S. Court of Appeals for the Fifth Circuit upheld the Department of Labor’s longstanding practice of using salary levels to determine overtime pay eligibility. Since 1938, the Fair Labor Standards Act has exempted workers with “executive, administrative or professional” duties from overtime pay, and the DOL’s accompanying regulations have long required that workers also earn salaries over certain thresholds to qualify for the exemptions. In Mayfield v. U.S. Department of Labor, a three-judge panel of the Fifth Circuit found that the DOL acted within its authority under the FLSA when it issued a 2019 rule setting the salary threshold at $35,568 annually for workers to qualify for an “executive, administrative or professional” exemption. This decision has several important implications.

First, the panel addressed the Supreme Court’s June 2024 decision in Loper Bright Enterprises v. Raimondo, which overturned the practice known as Chevron deference and emphasized that courts must independently assess whether an agency acted within its statutory authority. The judges concluded that the DOL’s interpretation of the overtime exemption is the best reading of the FLSA, supported by traditional statutory interpretation methods and consistent with 80 years of minimum salary rules. The Fifth Circuit’s decision shows that federal courts will still respect federal agency rules when those rules are consistent with judges’ independent assessment of the applicable law under which the rules are adopted.

Second, the Fifth Circuit’s decision has potential implications for pending legal challenges to the Biden administration’s 2024 rule that increases the salary requirements beyond the 2019 thresholds. The 2024 rule imposes new salary thresholds in two waves. On July 1, the first phase of the Biden administration’s 2024 rule came into effect, raising the salary threshold to $43,888 annually for workers to qualify for the “executive, administrative or professional” exemption. On Jan. 1, 2025, the salary thresholds will increase again. At that point, only workers who earn a salary of at least $58,656 — and whose primary duty includes executive, administrative or professional duties — will qualify for an exemption from federal overtime laws. Additionally, the rule provides for adjustments to the salary threshold every three years based on current wage data, with the next adjustment scheduled for Jan. 1, 2027. Lower, interim increases already took effect on July 1. Lawyers representing workers are likely to argue that Mayfield supports the salary threshold increases that took effect in July and that will go into effect in January 2025.

The Fifth Circuit joins the Second, Sixth, Tenth and D.C. Circuits in affirming the DOL’s authority to enforce the Minimum Salary Rule.

Robinson Bradshaw’s Employment & Labor Practice Group will closely monitor developments regarding the Fifth Circuit’s decision and any future decisions promulgated by other jurisdictions. For assistance in evaluating next steps for your workplace, please contact a member of our team.