Seyfarth Synopsis: On September 11, 2024, a panel of the U.S. Court of Appeals for the Fifth Circuit held in Mayfield v. U.S. Department of Labor that the Secretary’s salary tests for evaluating overtime exemptions are valid and do not exceed the Department of Labor’s authority under the Fair Labor Standards Act (“FLSA”).
Robert Mayfield, a Texas-based fast-food purveyor, challenged the U.S. DOL Wage and Hour Division’s 2019 rule, promulgated during the Trump Administration, regarding executive, administrative, and professional (“EAP”) exemptions from overtime under the FLSA. Mayfield argued the rule exceeded the Secretary of Labor’s authority because the FLSA only allows DOL to address a worker’s duties, not to set a salary threshold as part of the exemption analysis.
The district judge dismissed Mayfield’s case a year ago, holding that the FLSA gave DOL broad authority to “define and delimit” the EAP exemptions, which the DOL did not exceed with the 2019 rule. Mayfield appealed to the Fifth Circuit, which held oral argument just last month.
The Fifth Circuit panel issued a ruling upholding the district court’s opinion, finding that setting a minimum salary level for the EAP exemption is within DOL’s power to “define and delimit” the terms of the exemptions. That power, the panel held “is guided by the FLSA’s purpose and the text of the exemption itself.”
This decision, which stands (at least for now) as a win for the DOL, comes on the heels of multiple noteworthy decisions questioning and curtailing agency authority and action. This summer, in Loper Bright Enterprises v. Raimondo, the Supreme Court overruled the principle of Chevron deference. And just last year, the Court waded into the FLSA exemption arena in Helix Energy Solutions Group, Inc. v. Hewitt, with Justices Kavanaugh and Alito issuing a dissent effectively inviting litigants to challenge the EAP salary basis tests as exceeding DOL authority.
In reaching this holding, the Fifth Circuit explained that its precedent did not dictate the case’s outcome and that the major-questions doctrine is inapplicable. It then turned to “whether the Rule is within the outer boundaries of” Congress’s “uncontroverted explicit delegation of authority” to DOL.
The Fifth Circuit panel was “not persuaded” by Mayfield’s argument that, in defining and delimiting exemptions, the Department could address only work duties, since “[u]sing salary level as a criterion for EAP status has a far stronger textual foundation than Mayfield acknowledges.” Further, the Court approved “[u]sing salary as a proxy for EAP status . . . because the link between the job duties identified and salary is strong.” The Court cautioned, however, that where “the proxy characteristic frequently yields different results than the characteristic Congress initially chose, then use of the proxy is not so much defining and delimiting the original statutory terms as replacing them.”
The Fifth Circuit appeared to question whether Skidmore deference remains a viable analytical tool after Loper Bright, but unlike many post-Loper Bright opinions, the Fifth Circuit at least acknowledged Skidmore’s existence, suggesting
if Skidmore deference does any work, it applies here. DOL has consistently issued minimum salary rules for over eighty years. Though the specific dollar value required has varied, DOL’s position that it has the authority to promulgate such a rule has been consistent. Furthermore, it began doing so immediately after the FLSA was passed. And for those who subscribe to legislative acquiescence, Congress has amended the FLSA numerous times without modifying, foreclosing, or otherwise questioning the Minimum Salary Rule.
In approving DOL’s authority to promulgate the rule, the Fifth Circuit stated it was “join[ing] four of its sister circuits.”
Finally, the Court agreed with the District Court’s determination—and two of its sister circuits—that the “EAP exemption is guided by an intelligible principle,” so does not violate the nondelegation doctrine.
What’s Next?
Mayfield may request an en banc rehearing and/or seek Supreme Court review. But this decision could have ramifications for pending challenges to the DOL’s 2024 rule, which increased the salary level threshold for the EAP exemptions to $43,888 per year as of July 1, 2024, with another increase (to $58,656) taking effect on January 1, 2025.
The Mayfield ruling, as long as it stands, clears at least one impediment to the rulemaking, as the Fifth Circuit has blessed DOL’s authority to use the salary level tests within reason, i.e., so long as it serves as an acceptable “proxy.” That said, other challenges are still being litigated that focus on other aspects of the 2024 rule.
For now, employers should continue to prepare for the January 1, 2025 salary threshold increase. We will provide updates on further developments concerning the DOL’s new overtime exemption rule and the challenges to it.