In 2024 the U. S. Department of Labor (the “DOL”) implemented a new rule under the Federal Labor Standards Act (“FLSA”) regulating the minimum wage for exempt employees. The new rule (the “2024 Rule”) increased the minimum salary level for exempt workers from $684 to $844 per week (or from $35,568 annually to $43,888 annually) starting July 1, 2024.
The State of Texas and a group of trade organizations challenged the DOL’s authority to increase the wage threshold under the FLSA in the United States District Court, Eastern District of Texas (the “District Court”) in State Plano Chamber of Commerce v. United States DOL (E.D.Tex. Nov. 15, 2024, No. 4:24-CV-499-SDJ) 2024 U.S.Dist.LEXIS 207864.) Although the minimum salary level has been raised nine times since the enactment of the FLSA, the District Court held in this instance that the DOL exceeded its authority when enacting the increase.
The District Court found that the increased wage threshold under the 2024 Rule would mean that a substantial number of employees whose job duties meet the requisite duties test to be classified as exempt employees would no longer qualify as exempt. As a result, the District Court found that the salary-basis test would effectively displace the duties test as the predominant determining factor in assessing classifications. “The 2024 Rule’s salary thresholds ‘effectively eliminate’ consideration of whether an employee performs ‘bona fide executive, administrative, or professional capacity’ duties in favor of what amounts to a salary-only test.” (State Plano Chamber of Commerce, 2024 U.S.Dist.LEXIS 207864, at *73.) Thus, the District Court held the DOL “simply does not have the authority to effectively displace the duties test with such a predominant salary-level test.” (Id. at *63.)
The District Court also took issue with the 2024 Rule’s automatic triennial increase of the minimum salary threshold. The District Court therefore further held that the DOL exceeded its authority when including automatic increases every three years in the 2024 Rule on the grounds it violates the notice-and-comment rulemaking of the Administrative Procedure Act, noting that Congress has not acted to automatically index the minimum wage.
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