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October 15, 2024
The Fair Labor Standards Act (“FLSA”) provides minimum wage requirements and overtime pay for non-exempt employees, but the FLSA also exempts executive, professional, administrative employees from receiving 1.5X overtime compensation.
Using the authority granted to it under the FLSA, the federal Department of Labor (“DOL”) may raise minimum weekly salary thresholds as one predicate to proving an employee’s exemption from OT status.
In 2019, the minimum salary/week to keep an exempt status was raised to $684 per week ($35,568 annually). On July 1, 2024, the new minimum was increased to $844 per week ($43,888 annually).
Employers now face the latest increase to $1,128 per week ($58,656 annually), which is scheduled for January 1, 2025. With such a material increase for 2025 New Year, court challenges have been filed in Texas and Tennessee.
Based on case history, it appears unlikely that these challenges will be successful. Last month, on September 11, 2024, in Mayfield and R.U.M. Enterprises, Inc. v. U.S. Dep’t. of Labor, the federal Fifth Circuit (covering LA, MS & TX), analyzed the now almost 5-year-old 2019 salary increase. The appellate court confirmed that the DOL has the express authority to impose a minimum salary for white collar employee exemption under the FLSA.
The September 2024 Mayfield decision is notable: the Fifth Circuit joined 4 other circuit courts in finding that the DOL has the authority to raise the white-collar salary threshold. The Fifth Circuit analyzed the challenges to DOL’s authority and concluded that “setting a minimum salary level for the . . . [“white collar”] exemption is within DOL's power.” No. 23-50724, 2024 WL 4142760, at *7.
Though the 2025 increase has yet to face a direct legal challenge, the September 2024 Mayfield decision evaluating the DOL’s 2019 increase offers near identical support to allow the January 2025 salary raise. As we warned back in July this year employers must continue to prepare for the increase. Especially considering the nearly $15,000 salary increase, we urge a careful review so that employees are properly paid and classified.
Have questions or concerns about the likely increased cash burden on your operations? We are here to help!