The U.S. Department of Labor (DOL) won a legal battle last month when a federal appeals court affirmed the constitutional legitimacy of a salary threshold to help determine eligibility for an exemption from overtime pay. While the case centered on a 2019 Trump administration rule, it is a notable development amid ongoing challenges to new and upcoming overtime changes advanced by the Biden administration.

Generally, employees are owed time-and-half pay for working hours in excess of 40 hours in a week, but DOL allows certain executive, administrative, and professional (EAP) employees to be exempt from that mandate if they perform specifically identified duties, are paid a salary rather than an hourly wage, and have a salary that meets a certain threshold amount. However, in Mayfield v. U.S. Department of Labor, an owner of a number of fast-food restaurants around Austin, Texas, challenged the last part of that formula—claiming DOL was acting without congressional authorization by utilizing a salary threshold in conjunction with the duties test. 

Upholding a district court ruling against Mayfield, a 3-judge panel of the U.S. Fifth Circuit Court of Appeals found that DOL was acting within its statutorily delegated power to “define and delimit” the EAP exemption with a salary threshold.  

“While a particular minimum-salary rule could raise issues because of its size, Mayfield’s argument is that any consideration of salary is improper,” the court said. “That means that even though the particular salary level in question here is novel, the assertion of authority to consider salary is not.” 

Noting that such a threshold has been used for more than 80 years, the judges added, “Congress has amended the FLSA numerous times without modifying, foreclosing, or otherwise questioning the Minimum Salary Rule.” 

This ruling does not directly address challenges to the Biden administration’s actions this year that increased the minimum exempted EAP salary on July 1, are slated to boost it significantly again on January 1, and then would make automatic updates every three years beginning July 2027. However, it does add to the complex legal environment for the 2024 rule, particularly after a Texas district court (which is subject to the Fifth Circuit) earlier this year determined the 2024 rule is “likely unlawful” as its “sweeping changes” are “designed on their face to effectively displace the FLSA’s duties test with a predominant, if not exclusive, salary-level test.” 

Employers should be mindful that the requirements of the DOL’s 2024 rule are in force at this time, and regardless of what may or may not happen to the rule, now is an excellent opportunity for employers to examine and update their pay practices, ensure legal compliance, and address employment compensation matters.  

To help in this uncertain environment, ECFA recently updated our “Answering Your Overtime Questions” eBook in partnership with Sally Wagenmaker (Wagenmaker & Oberly). We’ve added some new content we hope will be helpful to churches and ministries with questions about the details of the new DOL regulation, the ministerial exception, and more. Organizations may also wish to revisit our June webinar on this matter, which features insights from Ted Batson (CapinCrouse) and John Melcon (Sherman & Howard).   

ECFA will continue carefully monitoring further overtime rule developments on Capitol Hill and in the courts.