President Biden’s rule that raised the salary amount for employers to use in determining whether they can exempt certain workers from federal overtime pay requirements survived another challenge on September 11.
An appeals court affirmed a lower court ruling that determined the U.S. Labor Department had the authority to use salary amounts in defining the terms of exempting workers from overtime pay under the Fair Labor Standards Act (Mayfield v. Department of Labor, 5th Cir., No. 23-50724, dec. affirmed, 9/12/24.)
This affirmation does not, however, mean the rule is no longer threatened with being rescinded or suspended. Further lower court action remains, questioning whether the agency is raising the salary threshold so high that it makes other duties tests practically irrelevant and harms employers.
The Latest Requirements Are in Effect
As of July 1, 2024, most U.S. employers must provide overtime pay to employees who work more than 40 hours in a workweek if they do not pay them at least $43,888 a year ($844 a week) on a salary basis.
The salary test, along with duties tests, lay out criteria for excluding those in executive, administrative, or professional positions from overtime pay requirements. The duties tests were not adjusted under this latest rule.
The current amount is 23% higher than the $35,568 a year ($694 a week) threshold previously in effect since 2019.
On January 1, 2025, an additional increase of 33.6%, to $58,656 a year ($1,128 a week) is scheduled to occur.
A less rigorous test that still considers duties, but not as much, applies to those considered highly compensated employees, and the monetary threshold for these workers to remain exempt from possible overtime pay increased to $132,964 per year, including at least $844 paid weekly on a salary or fee basis, the Labor Department said. This amount is also set to increase to $151,164 a year ($1,128 weekly) on January 1.
The rule calls for revisiting and resetting these amounts every three years.
Consistency Cited in Labor Department’s Approach
The 5th Circuit Court of Appeals, which is one level of the judiciary below the U.S. Supreme Court, noted in its affirmation that the question, in this case, was “whether the power conferred by the explicit delegation to ‘define and delimit’ the terms of the statute allows DOL to impose a salary requirement.”
In the ruling, the court said that more than 80 years ago Congress gave the Labor Department broad authority for implementing this provision.
“Though the specific dollar value required has varied, DOL’s position that it has the authority to promulgate such a rule has been consistent. Furthermore, it began doing so immediately after the FLSA was passed,” the court said.
According to the court, applying a minimum salary level to help determine exempt status “is within DOL’s power to define and delimit the terms of that Exemption and because that power is guided by the FLSA’s purpose and the text of the exemption itself.”
Author: Michael Baer
Michael Baer is president of Baer Unlimited, an independent research, analysis, and communications provider that helps Payroll modernize operations, stay compliant, and improve the use and security of their data. For more on these issues discussed above, contact him directly at mike.baer@baerunlimited.com, or book Michael as a mentor through the GPA Mentor page.
President Biden’s rule that raised the salary amount for employers to use in determining whether they can exempt certain workers from federal overtime pay requirements survived another challenge on September 11.
An appeals court affirmed a lower court ruling that determined the U.S. Labor Department had the authority to use salary amounts in defining the terms of exempting workers from overtime pay under the Fair Labor Standards Act (Mayfield v. Department of Labor, 5th Cir., No. 23-50724, dec. affirmed, 9/12/24.)
This affirmation does not, however, mean the rule is no longer threatened with being rescinded or suspended. Further lower court action remains, questioning whether the agency is raising the salary threshold so high that it makes other duties tests practically irrelevant and harms employers.
The Latest Requirements Are in Effect
As of July 1, 2024, most U.S. employers must provide overtime pay to employees who work more than 40 hours in a workweek if they do not pay them at least $43,888 a year ($844 a week) on a salary basis.
The salary test, along with duties tests, lay out criteria for excluding those in executive, administrative, or professional positions from overtime pay requirements. The duties tests were not adjusted under this latest rule.
The current amount is 23% higher than the $35,568 a year ($694 a week) threshold previously in effect since 2019.
On January 1, 2025, an additional increase of 33.6%, to $58,656 a year ($1,128 a week) is scheduled to occur.
A less rigorous test that still considers duties, but not as much, applies to those considered highly compensated employees, and the monetary threshold for these workers to remain exempt from possible overtime pay increased to $132,964 per year, including at least $844 paid weekly on a salary or fee basis, the Labor Department said. This amount is also set to increase to $151,164 a year ($1,128 weekly) on January 1.
The rule calls for revisiting and resetting these amounts every three years.
Consistency Cited in Labor Department’s Approach
The 5th Circuit Court of Appeals, which is one level of the judiciary below the U.S. Supreme Court, noted in its affirmation that the question, in this case, was “whether the power conferred by the explicit delegation to ‘define and delimit’ the terms of the statute allows DOL to impose a salary requirement.”
In the ruling, the court said that more than 80 years ago Congress gave the Labor Department broad authority for implementing this provision.
“Though the specific dollar value required has varied, DOL’s position that it has the authority to promulgate such a rule has been consistent. Furthermore, it began doing so immediately after the FLSA was passed,” the court said.
According to the court, applying a minimum salary level to help determine exempt status “is within DOL’s power to define and delimit the terms of that Exemption and because that power is guided by the FLSA’s purpose and the text of the exemption itself.”
Author: Michael Baer
Michael Baer is president of Baer Unlimited, an independent research, analysis, and communications provider that helps Payroll modernize operations, stay compliant, and improve the use and security of their data. For more on these issues discussed above, contact him directly at mike.baer@baerunlimited.com, or book Michael as a mentor through the GPA Mentor page.