New ruling may help 2024 overtime rule survive legal challenges

The U.S. Department of Labor (DOL) has the authority to set a minimum salary level for Fair Labor Standards Act (FLSA) overtime exemptions, the 5th Circuit Court of Appeals has ruled.

While the 5th Circuit’s ruling yesterday in Mayfield v US Department of Labor involved a challenge to the Trump administration’s 2020 overtime rule (which raised the minimum salary for most FLSA overtime exemptions to $35,568 per year), it will likely help the Biden administration’s 2024 overtime rule (which raised the minimum salary to $43,888 on July 1 and will raise it again to $58,656 on January 1, 2025) to survive the legal challenges before it.

At least three lawsuits have been filed seeking to overturn the 2024 overtime rule, one by the state of Texas, one by a coalition of business interests and another by a software development and marketing firm. All three of them questioned whether the DOL has the authority to set any minimum salary level, let alone to raise it as high as $58,656. All three also cited the Mayfield case, which was ongoing at the time they were filed.

Although the 5th Circuit — whose rulings set binding precedent over the district courts where the lawsuits were filed — has upheld the DOL’s authority to set a minimum salary level, the 2024 rule still could be overturned on other grounds. Even if precedent requires the lower courts to uphold the DOL’s general statutory authority to add a minimum salary requirement, a district court still could overturn the 2024 rule’s specific minimum salary levels because they are so high that the exemptions’ duties tests become irrelevant or because they are “arbitrary and capricious.”

The DOL’s power to set salary levels “is not unbounded,” the 5th Circuit noted.

The Mayfield plaintiffs may ask the 5th Circuit to rehear their case and/or appeal to the Supreme Court. In the meantime, employers have more reason to prepare for the January 1 salary increase.