DOL’s Authority to Set Salary Threshold for Overtime Exemption Upheld

The U.S. Department of Labor’s (DOL’s) decades-long practice of setting salary thresholds for white-collar exemptions was upheld on Sept. 11 by the 5th U.S. Circuit Court of Appeals, which in a unanimous panel opinion avoided a federal circuit court split on the issue. The DOL’s recent increases to the salary threshold may still be vulnerable to legal challenges, however. We’ve gathered articles on the news from SHRM and other outlets.

Challenge of Established Practice Rejected

For years, the DOL has defined the so-called white-collar exemption in the Fair Labor Standards Act (FLSA) to include a minimum-salary requirement. The plaintiff challenged the overtime rule as updated by the Trump administration, asserting that any rule imposing a salary requirement exceeded the department’s authority. The 5th Circuit ruled that the 2019 minimum-salary rule, which took effect in 2020, was within the department’s authority to define the terms of the exemption and that this power was not an unconstitutional delegation of legislative power.

The 5th Circuit noted that it was joining four other federal appeals courts in holding that the DOL has the statutory authority to issue the minimum salary rule.

(5th Circuit’s ruling)

Three-Part Test

Under the FLSA’s white-collar exemption, executive, administrative, and professional employees can be exempt from overtime pay eligibility if they’re salaried, make more than a certain amount per year, and have certain job duties. The 2019 rule had raised the salary piece of that test to $35,568, so workers earning less than that amount each year would be eligible for overtime pay.

(Bloomberg Law)

Biden Administration’s Rule

The Biden administration’s two-part approach to implementing its new overtime rule—establishing one raise of the salary-threshold level on July 1 and another on Jan. 1, 2025—gives employers options for adjusting the pay of their exempt employees.

Effective July 1, the FLSA’s annual salary-level threshold for white-collar exemptions to overtime requirements increased from $35,568 to $43,888. As of Jan. 1, 2025, the annual salary threshold will rise to $58,656.

The final rule, affecting millions of workers, is, as of 2025, an increase of nearly 65%. “It’s a very big jump,” said Natalie Bare, an attorney with Duane Morris in Philadelphia.

(SHRM)

Recent Overtime Rule Was Blocked for Texas State Employees

The new federal overtime rule was blocked from applying to employees of the state of Texas on June 28, just days before the rule’s first increase to the salary threshold was to take effect on July 1. Citing the Supreme Court’s June 28 decision in Loper Bright Enterprises, the district court said the Supreme Court “made clear that ‘courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority.’ ”

(SHRM)

Next Steps for HR?

With lawsuits challenging the DOL’s most recent overtime rule, some HR professionals are wondering whether they should wait until just before the Jan. 1, 2025, effective date to comply. Don’t wait, experts say, but have a plan B in case the rule is blocked by the courts.

“One of the greatest challenges is the unknown,” said David Epstein, SHRM-SCP, director of human resources and talent strategy at Mobilization for Justice Inc. in New York City. “You still must prepare for the changes and their impact on salaries, fiscal, and so on. But at the same time, prepare for a court challenge that causes a delay or change in implementation.”

(SHRM and All Things Work)