Federal Court Affirms DOL OT Authority

The Fifth Circuit Court of Appeals affirmed the DOL’s authority to set a salary level for overtime exemptions under the Fair Labor Standards Act. 

Why it matters: The ruling clears the way for the DOL to continue regulating overtime pay through a salary test, rather than just by duties of the job in question. 

Background: The case stems from a legal challenge to a Trump-era update to overtime exemptions under the FLSA which argued that the DOL cannot set a salary threshold for overtime exemptions. 

The decision: The Fifth Circuit Court of Appeals, usually skeptical of agency authority, affirmed a lower court’s decision and held that the FLSA gives the DOL clear authority to set a salary level for overtime exemptions. The Court noted that Congress has amended the law several times without removing such authority from the DOL, and that the text of the law provides guardrails for its use. 

Limited authority: The Court emphasized that the overtime salary threshold must be reasonably tied to the meaning and duties of the jobs potentially exempted from overtime requirements, which may limit how much the DOL can increase the salary threshold moving forward. 

What about the Biden OT rule? 

• The Biden OT rule, which went into effect in July, raised the salary thresholds for overtime exemptions significantly – up to $58k for standard employees, and up to $151k for highly compensated employees (starting January 1). 

• While the above decision concerned a Trump-era rule, the Biden rule is also the subject of several pending legal challenges. 

• The Fifth Circuit’s decision here may bolster the Biden administration’s defense of its own rule in those lawsuits.