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DOL Looks Likely to Win Salary Threshold Fight

Originally published in the Mississippi Business Journal.

Effective July 1, 2024, the U.S. Department of Labor raised the minimum salary that employers must pay to avoid paying overtime to people who perform executive duties. The minimum weekly salary of $684 became $844 on July 1, 2024 and will rise to $1,128 weekly on January 1, 2025, with annual inflation adjustments thereafter. Pay a manager or a supervisor less and you will owe overtime, no matter how fully he or she may function as an executive. This provoked immediate suits to block enforcement.

The complaining parties, including the State of Texas and trade associations, contested the unprecedented size of the required raises (an argument made in prior years), but also argued that Congress did not authorize DOL to treat compensation level as a proxy for executive duty performance. The new argument was simple: on its face, the statute bases exemption on executive duties, not executive compensation; salary level is irrelevant. In a 36-page opinion published June 28, 2024, the U.S. District Court for the Eastern District of Texas agreed, and preliminarily enjoined DOL’s enforcement of the new salary rules against the State of Texas. See Texas v. U.S. Department of Labor , E.D. Tex. Case No. 4:24-cv-00499 (Doc. 38). The Court then set a schedule for briefs to be filed before entry of a final judgment sometime after September 19, 2024.

Meanwhile, in the U.S. Court of Appeals for the Fifth Circuit (covering Louisiana, Mississippi, and Texas), an overlapping case was under consideration. The Fifth Circuit’s opinion in Mayfield v. U.S. Department of Labor, No. 23-50724 (Sept. 11, 2024) approved DOL’s use of salary as a proxy for executive duty performance unless, in a particular case, the higher salary requirement effectively replaces and overrules the duties test. DOL promptly told the Texas District Court that Mayfield requires dismissal of the suit pending there.

The State of Texas and its fellow challengers aren’t done fighting, and still have a chance to win, but it’s not looking good. I am reminded of The Black Knight scene in “Monty Python and the Holy Grail” (1975):

Black Knight (arms severed): Have at you!
King Arthur: You are indeed brave, Sir Knight, but the fight is mine.
Black Knight: Oh, had enough, eh?
Arthur: Look, you stupid #$%^&@*, you’ve got no arms left.
Black Knight: Yes I have.
Arthur: Look!
Black Knight (looking): Just a flesh wound.

The Fifth Circuit’s Mayfield opinion is especially bad news for employers because federal agencies have had their toughest luck there in recent years. The Mayfield opinion may foredoom a plaintiff-friendly ruling in the Texas case, and any chance of Fifth Circuit affirmance of a plaintiff-friendly ruling on appeal. A Circuit split commonly is required for review by the U.S. Supreme Court. The Fifth Circuit siding with DOL in Mayfield materially reduces the chances of a review-triggering Circuit split.

If the betting line was “pick ‘em” on September 10, DOL should be giving 11.5 points on September 24. Odds are that the Executive exemption salary threshold will be jacked-up on January 1, 2025.