Employers fearing rising labor prices can relaxation just a little simpler now after a Texas federal court docket struck down the U.S. Division of Labor’s (“DOL”) closing rule (the “2024 Rule”), which, in July 2024, elevated the minimal wage employers are required to pay workers below the chief, administrative, {and professional} (“EAP”), or “white collar,” exemptions to keep away from paying time beyond regulation wages in any other case required by the Honest Labor Requirements Act (“FLSA”), and which might have required even increased salaries to be paid beginning January 1, 2025.
The FLSA exempts “any worker employed in a bona fide govt, administrative, or skilled capability” from minimal wage and time beyond regulation necessities.” 29 U.S.C. § 213(a)(1). Congress delegated to the DOL the authority to “outline[] and delimit[]” the phrases “bona fide,” “govt,” “administrative,” “skilled,” and “capability.” Id. To be clear, the FLSA doesn’t expressly assign a minimal wage requirement to the EAP exemptions. Nevertheless, via a sequence of rules, the DOL has created a check for the EAP Exemptions that considers not solely an worker’s job duties and tasks but additionally their compensation. Though the EAP exemptions primarily give attention to a purposeful, duties-based inquiry – in different phrases, does the worker really carry out the form of duties intending to satisfy the EAP exemptions – the DOL traditionally has used wage as a proxy for skilled or administrative authority to make sure the EAP exemptions don’t deprive low wage however loftily titled employees of time beyond regulation compensation.
The FLSA directs the DOL to revisit the EAP exemptions “occasionally by rules of the Secretary [of Labor].” 29 U.S.C. § 213(a). Previous to the adoption of the 2024 Rule, the minimal wage threshold has been raised 9 occasions. The 2024 Rule, nonetheless, raised the minimal wage threshold considerably. Particularly, the 2024 Rule (1) elevated the wage threshold from $684 in weekly earnings to $844 efficient July 1, 2024; (2) elevated the weekly wage threshold to $1,128 efficient January 1, 2025; and (3) included a mechanism to robotically improve the minimal wage threshold each three years primarily based on up to date earnings information, beginning on July 1, 2027.
The substantial improve within the wage threshold led, predictably, to authorized challenges. As we beforehand reported, the State of Texas sued to enjoin the 2024 Rule, however the decide listening to the problem granted solely restricted reduction. Particularly, in July 2024, the court docket issued a restricted injunction solely barring the 2024 Rule from going into impact with respect to Texas public workers. As to all different workers—personal workers in Texas and private and non-private workers in all different states—the court docket didn’t pause implementation of the 2024 Rule.
However the identical decide who issued this restricted reduction on the preliminary injunction stage then heard substantive challenges to the 2024 Rule and, on November 15, 2024, Decide Sean Jordan granted abstract judgment for Texas and concluded the DOL exceeded its authority when it promulgated the 2024 Rule. In State of Texas v. U.S. Dept. of Labor, et al., Civil No. 4:42-CV-468-SDJ (E.D. Tex. Nov. 15, 2024), the court docket dominated that, in adopting the 2024 Rule, the DOL improperly displaced the duties element of the EAP exemptions with a predominantly salary-driven evaluation. “[T]he EAP Exemption requires that an worker’s standing activate duties—not wage—and since the 2024 Rule’s adjustments make wage predominate over duties for hundreds of thousands of workers, the adjustments exceed the [DOL]’s authority to outline and delimit the related phrases.” Id. Particularly, information associated to each the July 2024 and January 1, 2025 wage will increase, Decide Jordan decided the brand new minimal wage threshold necessities would “display screen[] out substantial percentages of workers who meet the duties check[.]” Id. at 51. That, he defined, was administrative overreach. As well as, the court docket discovered the 2024 Rule’s automated system of accelerating the minimal wage each three years was not grounded in any adjustments in exempt workers’ duties, and thus additional departed from the correct focus below the EAP exemptions. Id. at 51-53.
As a result of the DOL exceeded its authority in issuing the 2024 Rule, the Courtroom totally vacated it, hanging it down nationwide and remanding the matter to the DOL for “additional consideration in gentle of this opinion.” Id. at 62. Because of this, each the July 1, 2024 improve and the pending January 1, 2025 improve have been nullified. The minimal wage required to fulfill the EAP Exemptions, offered the duties checks are met, returns to $684/week, the brink that had been in place previous to the 2024 Rule’s efficient date. Though the DOL might attraction the choice to the Fifth Circuit Courtroom of Appeals, the outcomes of the latest election and anticipated adjustments on the DOL with the incoming presidential administration make this transfer unlikely.
We’ll proceed to watch and replace with developments.