Court to feds: You can keep using salary to measure which workers should receive overtime

Emphasizing that the Department of Labor has used a minimum salary requirement to help decide who is overtime-eligible, the Fifth Circuit Court of Appeals recently determined that the Fair Labor Standards Act authorizes this benchmark.

As it had done many times before, the DOL determined in 2019 to raise the minimum salary required to qualify for the executive, administrative, and professional employee exemption, also known as the EAP or white collar exemption, from $455 per week to $684 per week, an increase of 50.3%. But then a small business owner sued the DOL, arguing that the 2019 Rule exceeded the DOL’s statutorily conferred authority. He claimed that his businesses succeeded by offering high bonus payments to the best-performing store managers, and the Rule would force him to pay a higher salary to all managers regardless of performance, with not enough money left over to reward the best performers.

The DOL has never had the authority to use salary to define the EAP exemption, argued the plaintiff.

Except it does, concluded the Fifth Circuit, “because there is an uncontroverted, explicit delegation of authority” from Congress, and the 2019 Rule “is within the outer boundaries of that delegation.” The Fifth Circuit observed that much like a “bachelor,” an “unmarried man” uses both gender and marital status, defining executive, administrative, or professional work to include a salary floor “tracks the simple fact that a definition can rely on multiple types of characteristics.”

It’s like how employment law bloggers can be striking and intelligent.

Also, the EAP exemption monikers mean something. The court emphasized that the “Executive” exemption “connote[s] a particular status or level for which salary may be a reasonable proxy. Indeed, the EAP Exemption is also frequently referred to as the ‘White Collar Exemption.'” The court also pointed out that “distinctions based on salary level are also consistent with the FLSA’s broader structure, which sets out a series of salary protections for workers that common sense indicates are unnecessary for highly paid employees.”

That’s not to say that the DOL’s authority to raise the salary level for the EAP test is unlimited. The court underscored that its ruling was not about whether the amount of the 2019 Rule increase was “arbitrary and capricious.” Indeed, the plaintiff did not argue that it was; instead, he posited that the DOL should not use salary as an overtime proxy at all.

The DOL can use salary as part of the EAP exemption. Now, the open issue is whether the overtime rule that took effect in July, which will raise the minimum salary to $1,059 per week at the end of the year, a roughly 55% increase from the 2019 Rule, can survive court scrutiny based on the amount of the increase. That issue is currently being litigated in Texas.