On September 11, 2024, the Fifth Circuit Court affirmed that the U.S. Department of Labor can impose minimum salary requirements for white collar overtime pay under the Fair Labor Standards Act. The Fifth Circuit Court joins the Second, Sixth, Tenth, and D.C. circuits in holding that the DOL has the statutory authority to promulgate minimum salary requirements.

The case prompting these comments is Mayfield v. Department of Labor. This decision leads us to explore four questions from an employment law perspective: what we know, what we do not know, what happens next, and what are HR Managers supposed to do now?

Understanding Employee Classification, Employer Obligations and Overtime Limit with Kilgore & Kilgore

Our Texas employment lawyers are following this matter closely. We can help you understand the shifting regulations. Click this link to see our October 2023 post on the issue. Whether you are a business owner, an employee, or an HR manager, you need to understand how to comply with new overtime rules. Reach out to us if you have questions about employee classification, overtime pay, compensation rules, white collar exemptions, and how to comply with new overtime rules. Use this link to Contact Us or call us at 214.969.9099. Click on this link Wage and Hour Compliance to learn about our Employee Wage and Hour Law Practice.

2019 Rule Challenged: Mayfield v. Department of Labor

Robert Mayfield is a Texas fast food employer whose store managers became entitled to overtime as of January 1, 2020, under a change in DOL guidance known as the 2019 rule. The change had obvious economic consequences for all concerned. Mayfield sued the DOL in 2022, arguing that “the DOL lacks, and has always lacked, the authority to define the [overtime rules] in terms of salary level, as opposed to the duties-based test in the statute.”

The U.S. District Court for the Western District of Texas granted the DOL’s motion for summary judgment, finding the agency did have the authority. On appeal, the Fifth Circuit Court affirmed the District Court’s decision and upheld the DOL action under the approach required by the U.S. Supreme Court’s recent decision in Loper Bright v. Raimondo.

Who is an EAP Employee?

The FLSA requires that covered nonexempt employees must receive overtime pay at a rate not less than one-and-a-half times the regular rate of pay for hours worked over forty per workweek. The FLSA takes minimum salary and overtime pay protections away from executive, administrative, and professional workers (often shorthanded as EAP, white-collar, or nonexempt employees), presumably on the theory that they can negotiate decent salaries. To be considered an EAP employee, a worker must primarily perform executive, administrative, or professional duties, as provided under the DOL’s duties test. Since the FLSA became law in 1938, the DOL has also used a salary-level test as part of its criteria for the white-collar exemptions.

Calculating Overtime Pay Under the New Rule

The salary threshold is updated periodically. It is not easy navigating the overtime pay rules in an evolving legal climate. In 2019, DOL issued a rule raising the minimum salary required to qualify for most EAP exemptions from $455 week ($23,660 annually) to $684 per week ($35,568 annually), an increase of 50.3 percent. In 2024, that salary level was updated again. Effective as of July 1, 2024, the 2024 rule raises the minimum salary threshold to $844 per week (equivalent to $43,888 per year) and to $1,128 per week (equivalent to $58,656 per year) effective as of January 1, 2025. The 2024 rule requires that the salary threshold increase every three years thereafter – another significant increase.

Implementing New Overtime Rules in the Workplace

Both the 2019 and the 2024 rules are designed to protect that vulnerable group of strivers — workers who are moving from hourly to professional employment by sheer dint of working hard and being good at their jobs. Sadly, many can find themselves taking home less when they get that coveted promotion and lose their entitlement to overtime pay. On the other hand, this can seem like a zero-sum equation. What employees gain employers lose. The increased threshold can be a big hit to businesses.

Employment Practices, Workforce Management, Overtime Limit, and Unexplored Territory

The Fifth Circuit Court’s decision in Mayfield firmly establishes that the DOL may consider salary as well as the nature of an employee’s duties when determining who is covered by the FLSA’s rules on minimum salary and overtime pay. Unless and until overturned by the U.S. Supreme Court, that principle is binding on Texas federal courts considering either the 2019 or 2024 rules. The Mayfield case does not decide:

• whether the actual salary levels of the 2019 rule can stand;
• whether the 2024 salary threshold increases are valid;
• whether the 2024 increases effectively eliminate the statutory duties test; or
• whether the provision in the 2024 overtime rule allowing for an automatic
  increase in the salary threshold every three years is valid.

Neither does Mayfield explicitly address a recent decision of the Eastern District of Texas that preliminarily enjoins enforcement of the 2024 rule with respect to the State of Texas as an employer. That is a lot of unexplored territory.

What Happens Next?

Robert Mayfield may request an en banc rehearing and/or seek Supreme Court review. In their dissent to Helix Energy Solutions Group, Inc. v. Hewitt, Associate Justices Alito and Kavanaugh seem to have invited a petition for certiorari. Although Mayfield is about the 2019 rule, a Supreme Court reversal of the lower court’s decision could have ramifications for pending challenges to the DOL’s 2024 rule.

Three lawsuits are already underway:

• State of Texas v. U.S. Department of Labor – The Eastern District’s injunction against enforcement of the 2024 rule is expected to make its way to the Fifth Circuit Court before January.
• Flint Avenue LLC v. U.S. Department of Labor – in the Northern District of Texas, also involves a preliminary injunction against enforcement of the 2024 rule. Cross-motions for summary judgment are pending. 
• Association of Christian Schools Int’l v. US. Department of Labor – This case was filed in a Tennessee federal court. At the parties’ joint request, this case is now pending in the District of Columbia federal court.

How to Comply With the New Overtime Rules

The short answer is to sit tight. For now, employers should continue to prepare for the January 1, 2025, salary threshold increase. The longer answer is to be prepared for changes to the statutes.

Employee Rights Under New Overtime Regulations

Kilgore attorneys understand the complexities of employer obligations and employee rights. Our Texas employment lawyers have a depth of experience with wage and hour law, overtime pay, employee rights, and wage claims. We are well prepared to handle the ongoing changes in wage laws to help our clients. Use this link to get the conversation started Contact Us. Or give us a call at (214) 969-9099.