iIn a strongly worded opinion, a federal judge in Texas held the U.S. Department of Labor (DOL) likely exceeded its authority in implementing its Final Rule raising the minimum salary level requirements for executive, administrative, and professional (EAP) exemptions to the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA). State of Texas v. U.S. Dep’t of Labor, E.D. Tex., June 28, 2024.
“An examination of the ordinary meaning of the EAP Exemption’s undefined terms shows that the Exemption turns on an employee’s functions and duties, requiring only that they fit one of the three listed, i.e., ‘executive,’ ‘administrative,’ or ‘professional capacity.’ The exemption does not turn on compensation,” the court held. Quoting none other than Yogi Berra, the Court noted the case is “déjà vu all over again,” referencing a Texas district court decision that had enjoined the DOL’s attempt to increase the salary level in 2016.
The standard EAP salary threshold rises from the current floor of $684 per week ($35,568 annually) to $844 per week ($43,888 annually) — the the first phase in what could be an overall 65 percent increase to the standard minimum salary requirements. The simplified exemption test for highly compensated employees will increase to $132,964.
On January 1, 2025, the salary threshold is scheduled to increase even more sharply, to $1,128 per week ($58,656 annually). The highly compensated employee floor will rise to $151,164. The Final Rule also provides for automatic increases to the salary thresholds every three years, based on then-existing wage data, without first allowing an opportunity for public comment. (See “DOL Releases Final White-Collar Exemption Rule, Sets Minimum Salary to Increase in Phases Beginning July 1, 2024.”)
“The application of a salary threshold for the EAP Exemption only comports with the Department’s authority under the FLSA, if at all, to the extent such threshold serves as a plausible proxy for the categories of employees otherwise exempted by the duties test,” the court held, explaining that a salary requirement would only withstand scrutiny if the employee otherwise satisfied the duties requirement. “A Department-invented test, untethered to the text of the FLSA, that systematically deprives employees of the EAP Exemption when they otherwise meet the FLSA’s duties test, is necessarily unlawful.”
The decision, however, only applies to the State of Texas. The court enjoined the DOL from enforcing the increase as to Texas government employees only as the State of Texas is the only Plaintiff; it declined to issue a nationwide injunction. It noted, however, that a similar challenge on behalf of various Texas businesses is pending, and this decision may foreshadow a similar result in that case, as well as in a case pending in the Fifth Circuit that challenges the DOL’s authority to issue any salary requirement.
Because the injunction only applies to the employees of the State of Texas, for all other FLSA-covered employers, the rule will take effect as scheduled on Monday, July 1, though other decisions will be forthcoming.
The district court’s decision is the first to apply the U.S. Supreme Court’s June 28, 2024, decision in Loper Bright Enters. v. Raimondo, which overruled the “Chevron doctrine” of deference to federal agencies, to find a federal rule is unlawful.
