Dive Brief:
- The U.S. Department of Labor appealed Nov. 26 a federal judge’s decision to block its final rule expanding overtime pay eligibility under the Fair Labor Standards Act, according to court documents.
- Last month, Judge Sean Jordan of the U.S. District Court for the Eastern District of Texas held that the rule, which would have expanded overtime eligibility to an estimated 1 million U.S. workers, exceeded DOL’s authority and was unlawful. The decision effectively returned the annual minimum threshold at which applicable employees must be paid in order to be considered overtime exempt to $35,568.
- The agency’s appeal will go to the 5th U.S. Circuit Court of Appeals, which recently upheld DOL’s ability to consider salary level when determining overtime eligibility with the caveat that the department “cannot enact rules that replace or swallow the meaning” of the FLSA’s exemption statute.
Dive Insight:
With the election of President-elect Donald Trump last month, attorneys who previously spoke to HR Dive said that the Biden administration’s overtime rule is likely dead, despite news of the appeal. That is in part because Trump, in his first term, dropped an appeal of a federal judge’s decision blocking the 2016 Obama-era final rule and could repeat this series of events after his inauguration on Jan. 20.
The 5th Circuit also may not view DOL’s appeal favorably in spite of its September 2024 decision in Mayfield v. U.S. Department of Labor to uphold the department’s salary basis test. Jordan, in his decision, acknowledged the outcome of Mayfield but contrasted the Biden administration’s final rule with the 2019 overtime rule — issued under Trump — which the Mayfield plaintiffs challenged.
Specifically, Jordan noted that, unlike the 2024 rule, the 2019 rule occurred after a 40% increase in the federal minimum wage had taken effect in the years since DOL’s last update to the minimum salary level for overtime purposes in 2004. The 2019 rule also expanded overtime eligibility to roughly 1.2 million workers, which Jordan said was similar to the 2004 rule’s effect of changing exempt status for approximately 1.3 million workers.
The 2024 rule, however, “comes after only five years have passed since the last such increase,” Jordan said. “And for the first time in 85 years that increase comes when there has been no change to the federal minimum wage.”
Additionally, Jordan said the 2024 rule would have cut against a principle for determining overtime eligibility articulated by DOL in 1958, known as the “Kantor Method,” which established that a minimum salary threshold “should not disqualify more than 10%” of employees who would otherwise be exempt on the basis of their job duties alone. The 2024 rule, Jordan said, would have made at least a third of such employees nonexempt and thereby eligible for overtime.
“When a third of otherwise exempt employees who the Department acknowledges meet the duties test are nonetheless rendered nonexempt because of an atextual proxy characteristic — the increased salary level — something has gone seriously awry,” Jordan said.
Jordan said he had similar concerns about the second prong of the 2024 final rule, which would have instituted a separate increase in January 2025 that utilized an updated methodology for calculating the minimum salary threshold. DOL’s proposal to implement automatic three-year updates to the threshold also “effectively abdicates” the agency’s role in defining and delimiting the EAP exemption, Jordan said, and it violates the notice-and-comment rulemaking requirements of the Administrative Procedure Act.
