The Department of Labor’s decision to significantly increase the minimum salary required to claim the so-called white-collar exemptions from federal overtime requirements has prompted legal challenges from employers. These challenges argue that the second tranche of increases, set to take effect January 1, is invalid due to its magnitude and failure to take into account income differences across the U.S.
Earlier this month, the Fifth Circuit Court of Appeals heard arguments in a case that takes a different approach toward challenging the DOL salary levels. In this case, a Dairy Queen franchisee contends that the Fair Labor Standards Act never authorized DOL to establish any salary minimum as the basis for the exemptions. In other words, the statute only mentions exempt and non-exempt duties, and this should be the sole basis for the exemption determination regardless of the salary paid to the employees.
The lower court disagreed, noting the fact that the salary test has been in place for decades with numerous increases over the years. However, this decision was made prior to the Supreme Court’s overruling of its Chevron decision. The federal district court’s opinion cited Chevron deference as a basis for its conclusion. With Chevron out of the way, the plaintiffs argued that the Fifth Circuit can make a determination on the meaning of the FLSA without the same level of regard for DOL’s interpretation or past practices.
If ultimately successful, this argument would eliminate the salary test, leaving employers free to pay exempt employees any amount they can negotiate, as long as the workers’ duties meet the test for the relevant exemption. This decision would overturn over 80 years of precedents, and fundamentally change the interpretation of the FLSA. The Fifth Circuit may or may not issue an opinion before the scheduled January minimum salary increase. Any decision will likely be appealed to the Supreme Court, which may decide to provide the final word on this new argument.
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