Written by: Kimberly DeSario Javier
In April 2024, the U.S. Department of Labor (“Department”) announced the raise of the minimum salary for white-collar workers to qualify as exempt employees. Dubbed the “Final Rule,” this new regulation went into effect on July 1, 2024, and will raise the minimum salary standard by 65% on January 1, 2025. However, the Final Rule faces multiple legal challenges. How will the courts analyze the Final Rule in a new post-Chevron era after the Loper Bright Enterprises v. Raimondo decision?
Prior to this rule change, a business could pay a full-time EAP worker an annual salary of $35,568, and if the worker passed a job duties test, the company was not required to pay them overtime which is time and a half for hours worked over 40 hours per week. The DOL issued the Final Rule under the delegated authority of a statute enacted by Congress that expressly allows the Secretary of Labor to define and delimit what type of employee is classified as working in an executive, administrative, or professional capacity.
The Final Rule impacts executive, administrative, and professional (EAP) workers as well as highly compensated employees (HCE). These employees are exempt from minimum wage and overtime pay requirements under the Fair Labor Standards Act (FLSA), which sets labor standards for both private and public sectors. The Final Rule increased the EAP annual salary amount to $43,888 in July 2024, and is scheduled to increase to $58,656 in January 2025. The rule also mandates that the DOL review the threshold every three years to keep alignment with current earnings data. HCE employees saw an increase from its previous $107,432 minimum annual salary to $151,164 by January 2025. The increased salary requirements will have a significant impact on many businesses and employees alike across the nation.
In 2004, the Department implemented a “standard” duties test with a salary threshold of $23,660. In 2016, it proposed a new rule that raised this threshold to $53,972, but a Texas court blocked its enforcement, ruling that the Department exceeded its statutory authority under the Fair Labor Standards Act (FLSA). The court determined “the Department’s authority is limited by the plain meaning of the words in the [FLSA] and Congress’s intent.” It concluded that the increased salary level effectively made employee duties irrelevant for those earning below this threshold. In response, the Department revised the EAP Exemption regulations in 2019, setting the minimum salary level at $35,568, based on the same methodology as the 2004 Rule, aligning with current earnings data.
When the 2019 Rule was challenged, the Court upheld the rule based on the Chevron standard, which was a legal doctrine that forced courts to defer to agencies’ reasonable interpretation of statutes when the law was silent or ambiguous on a particular issue. However, in the landmark ruling by the Supreme Court in Loper Bright Enterprises v. Raimando, the Court undercut agency rulemaking authority and overturned the Chevron standard. Courts can no long longer defer to the agency interpretation of an ambiguous or silent statute, but rather, the courts must now exercise their independent judgment when deciding whether an agency has acted within its statutory authority.
The key questions before the courts will focus on whether the statutes explicitly grant the Department the authority to issue regulations and, more specifically, to adopt a salary test. The statute does not expressly provide such authority, meaning individual courts will need to determine if the DOL is acting within its legal bounds based on their independent analysis.
With challengers of the DOL rules bringing suits through the Texas legal system, it is likely that these Republican-leaning courts will leverage the end of the Chevron standard to determine that the Department overstepped its regulatory authority, contradicting the plain meaning of the statute. The stakes are high, as the case challenging the 2019 Rule is set for appeal in the Fifth Circuit. A ruling not only on the DOL issues but on the new Loper-Bright standard could establish important precedents for the entire circuit and influence surrounding circuits.
In conclusion, the implications of these legal developments are significant for both businesses and employees. As the landscape of wage and hour regulations continues to evolve, the courts’ interpretations will play a crucial role in shaping the future of labor standards in the United States.
Sources:
29 C.F.R. § 541 (2004).
29 U.S.C. § 213(a)(1).
Businesses Quick to Deploy Chevron’s End to Attack Labor Rules, Bloomberg Law (July 19, 2024).
DOL holds webinar on new overtime rule effective July 1, Repairer Driven News . (July 19, 2024).
Final Rule: Restoring and Extending Overtime Protections, U.S. Department of Labor . (July 19, 2024).
Loper Bright Enterprises v. Raimondo, SCOTUSblog . (July 19, 2024).
Loper Bright Enterprises v. Raimondo, 603 U.S. ___ (2024).
Mayfield et al. v. U.S. Department of Labor et al., Order Granting Summary Judgment, 09/20/2023.
Nevada v. U.S. Dep’t of Labor, 275 F.Supp.3d 795 (E.D. Tex. 2017).
Wages and the Fair Labor Standards Act, U.S. Department of Labor . (July 19, 2024).