By Jeffrey W. Brecher, Jackson Lewis, Attorneys at Law
A Fifth Circuit panel heard oral argument on Wednesday, August 7, on whether Department of Labor (DOL) regulations imposing a salary requirement to satisfy the executive, administrative and professional exemptions is valid.
The case on appeal, Mayfield v U.S. Department of Labor, does not address the minimum salary level increase that took effect July 1, 2024. Rather, the appeals court is considering an ongoing challenge to the DOL’s previous regulation implemented during the Trump administration that increased the salary level to $35,568. The lawsuit challenges the DOL’s authority to require any salary level.
The plaintiff argues the statute, the Fair Labor Standards Act (FLSA), does not impose a salary requirement for the executive, administrative, and professional (EAP) exemptions, and that the DOL regulation imposing such a requirement is inconsistent with the statute. A federal district court in Texas previously upheld the Trump DOL rule. (See Federal Court Upholds DOL’s Authority to Set Minimum-Salary Test for White-Collar Exemption.)
The appellate court’s decision in Mayfield may resolve the issue as to pending challenges to the recently enacted DOL rule, which further increased the minimum salary level, with one increase effective July 1, 2024, and the next increase scheduled for January 1, 2025. If the Fifth Circuit holds the DOL has no authority to impose any salary requirement, the most recent DOL rule will also be invalid.
The FLSA says nothing about a salary requirement—it only requires employees to be employed in a “bona fide executive, administrative, or professional capacity.” But the FLSA gives the DOL the authority for “defining and delimiting” the EAP exemptions. One question the court is wrestling with, therefore, is whether the terms “bona fide” and “capacity” are broad enough to permit the DOL to impose a salary requirement as a way of “defining” and “delimiting” the exemption. Luke Wake (Pacific Legal Foundation), arguing for the employer, stated:
The text and structure of FLSA make clear that any employee who performs exempt duties meets the exemption. The Department can’t add to the text to impose conditions that it might find desirable.
Wake also argued that the appeals court is not bound by prior appellate decisions affirming the DOL’s authority to impose the minimum salary rule in light of the U.S. Supreme Court’s June 28, 2024, opinion in Loper Bright Enterprises, Inc. v. Raimondo, which overturned Chevron deference to agency rules. (See Go Fish! U.S. Supreme Court Overturns ‘Chevron Deference’ to Federal Agencies: What It Means for Employers.)
One member of the three-judge panel (all Republican-appointed judges) noted that while Chevron was overruled, Skidmore (or “persuasive” deference) is not. And under Skidmore, the court can take into account that the rule has been in place for 80 years, undisturbed by any Congressional attempts to reject it in the ensuing decades, despite other amendments to the FLSA.
“It is not a rule from last year…. It’s been around quite some time,” he noted. Another judge on the panel noted, however, “The fact that something has been done a long time is not dispositive.”
The text of the statute is what matters, Wake emphasized. “That congress has arguably acquiesced over the years does not speak to the text of the statute.”
Courtney Dixon, arguing for the Department of Labor, focused on the “bona fide” language in the FLSA, arguing that the minimum salary rule helps to identify whether employees are “genuinely working in an EAP capacity.” She suggested that employees earning less than a particular salary may not be “bona fide” executive, administrative, or professional employees.
Wake rejected “the notion that we have to look at compensation to understand if individuals are employed in an EAP capacity.” He also looked to the structure of the FLSA itself and observed that when Congress wanted to impose a compensation requirement, or to delegate authority to DOL to set minimum compensation rules, it did so explicitly. The statute “exempts teachers, with no caveat about salaries. If a teacher is exempt because she teaches, likewise a manager is exempt because she works in an executive capacity.”
Two judges appeared troubled by the DOL’s seeming unlimited ability to increase the salary level, with no limiting principles to guide it. They also focused on the “non-delegation” doctrine, which prohibits Congress from delegating authority to federal agencies without some intelligible principle to guide them.
According to Wake, “if you accept a blank-check interpretation of ‘define and delimit’ you run square into the nondelegation problem,” particularly in the absence of clear parameters for the agency. “Congress has delegated authority to the agency to work out the details. But work out the details how?,” he asked, stating that the DOL has not pointed to any guiding principles. “There is no direction as to how minimum salary is set.”
The panel suggested that it might remand the case to the district court to reconsider the rulemaking under Loper Bright, which the district court did not consider, and instead applied Chevron, but both parties opposed that approach.
Dixon emphasized that the salary minimum test has been upheld by every court of appeals that has considered the issue. Wake conceded that if the Fifth Circuit rules against the DOL it would create a circuit split, to which one judge noted, “you are putting us in a precarious position.”
We likely will see a decision before January 1, 2025, when the second phase of the current minimum salary rule is scheduled to take effect. A finding from the appeals court that the DOL lacks authority to impose any minimum salary rule would set up a circuit split, as the panel noted. That would tee-up the issue for the U.S. Supreme Court to resolve — where at least one Justice has questioned the DOL’s authority to impose the salary minimum.