By Scott Hecker, Jordan B. Schwartz, Kara M. Maciel, and Lindsay A. DiSalvo
On November 15, 2024, U.S. District Judge Sean D. Jordan of the Eastern District of Texas vacated the Biden Administration’s overtime exemption rule. The final rule, which went into effect on July 1, 2024, included a biphasic approach to raising the executive, administrative, and professional
(“EAP”) OT exemption salary thresholds. The threshold moved to $844 per week, or $43,888 annually on July 1, and would have escalated to $1,128 per week, or $58,656 annually, on January 1, 2025. The rule also included automatic triennial updates to the threshold. But as President Trump readies to return to the White House, the salary threshold for EAP exemptions under the FLSA now reverts to $35,568, the level set during his first term. [1]
Judge Jordan’s Memorandum Opinion and Order
Explaining a court’s role in the context of Loper Bright Enters. v. Raimondo, Judge Jordan vacated the rule as an unlawful agency action exceeding departmental authority under the Administrative Procedure Act and remanded it to the U.S. Department of Labor (“DOL”). He provided an extensive treatment of the salary threshold’s history, noting
the fundamental aspects of the salary-level test have included setting low minimum salary levels designed to exclude only obviously nonexempt employees, premised on wage-data for the lowest-wage region, the smallest-size business establishment group, the smallest-size city group, and the lowest-wage industry, applied by the Department in a manner consistent with serving only the purpose of separating exempt from nonexempt employees, not improving the status of such employees
Texas v. DOL, 4:24-CV-499, 4:24-CV-468, slip op. at 14 (Nov. 15, 2024, E.D. Tex). He also explored the recent U.S. Court of Appeals for the Fifth Circuit decision in Mayfield v. DOL, which was issued in response to a legal challenge to the 2019 DOL Final Rule that increased the minimum salary requirement for the EAP exemption from overtime, and held that:
[u]sing salary as a proxy for EAP status is a permissible choice because, as we have explained, the link between the job duties identified and salary is strong. That does not mean, however, that use of a proxy characteristic will always be a permissible exercise of the power to define and delimit. If 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.
117 F.4th 611, 619 (5th Cir. 2024). The Fifth Circuit’s Mayfield opinion concerned the Trump era overtime rule, so it did not address the new Biden Administration thresholds. Judge Jordan’s opinion took the next step, applying the Court of Appeals’ rationale to invalidate President Biden’s thresholds. His analysis considered three limitations on the DOL’s congressionally-delegated authority to define and delimit the EAP exemptions: Continue reading →
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