A Texas-based employer is taking direct aim at the DOL’s ability to create something called the “salary basis test” under the Fair Labor Standards Act (“FLSA”).

 

Overview of the FLSA

The FLSA is the federal law that governs minimum wage and overtime. Employee entitlement to overtime is one of the most litigated issues in labor and employment law. The FLSA mandates that employees receive overtime pay—1.5 times their regular rate—for hours worked beyond 40 in a workweek, unless the employee fits into one of the FLSA’s enumerated exemptions. The DOL then issued regulations defining which workers are exempt from OT pay under a category of exemptions colloquially as the “white-collar” exemptions. In so doing, the DOL created a minimum salary threshold for the overtime exemptions to apply. Said another way, for an employer to take advantage of an overtime exemption, the employee had to earn a minimum salary. Recently, the DOL raised the minimum salary threshold from to approximately $44,000 and plans to increase it to $59,000 in January 2025.

 

A Texas-based employer is challenging whether the DOL even has the authority to set a minimum salary threshold.

The Case is Robert Mayfield, et al v. United States Department of Labor. Mayfield is a restaurant franchisee operating under the corporate name R.U.M. Enterprises. When the DOL increased the minimum salary threshold, Mayfield sued the DOL claiming that he had employees who met the requirements for exemption but did not fall under the new salary threshold. Mayfield lost, with the lower court deferring to the DOL under the now-overruled Chevron doctrine.

The Fifth Circuit Court of Appeals recently heard arguments from the Texas employer asserting that Congress never authorized the DOL to set a minimum salary level for overtime exemptions. The employer is making this argument because of the recent Supreme Court decision overturning Chevron.

The End of Chevron

For 40 years, courts often deferred to federal agencies’ interpretations of ambiguous regulations. The Supreme Court’s dismissal of this practice allows courts to independently evaluate whether agencies have overstepped their bounds. This newfound judicial independence may lead to greater scrutiny of agency actions.

Specifically, last term the U.S. Supreme Court delivered four landmark decisions significantly curtailing the power of federal agencies. In one of those decisions, Loper Bright Enterprises v. Raimondo, the Court ruled that judges cannot defer to an agency’s interpretation of the law. This was the overruling of Chevrondeference.

Mayfield’s Appeal

Mayfield appealed. Between the time of the appeal and the oral argument, the Supreme Court issued the Loper Bright decision overturning Chevron. Now, with the end of Chevron deference Mayfield has a new, powerful argument at his disposal … that the Loper Bright decision marks the end of the DOL’s authority to impose minimum salary rules.

A decision is expected sometime in 2025. If the Fifth Circuit goes with Mayfield’s argument and eliminates the salary basis test, it will be a massive shift in labor and employment law. The salary basis test has been around for what seems like forever. It’s potential elimination is no small matter.

With the end of Chevron, we can expect more challenges like the one asserted by Mayfield and in short order.