Update: Will the DOL’s new exempt employee rules be delayed?

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UPDATE SEPTEMBER 24, 2024 – A Fifth Circuit Decision and More Motions

The Fifth Circuit Reaffirms that Salary Thresholds for Exempt Employees are Permitted under the FLSA

Back in 2019, the FLSA increased the salary threshold for exempt employees from $455 per week to $684. In response to the increase, Robert Mayfield and R.U.M. Enterprises filed a lawsuit arguing that the FLSA, as drafted and enacted by Congress, did not permit the US Department of Labor to set any salary thresholds for exempt employees when interpreting and enforcing the FLSA.

On September 24, 2024, the Fifth Circuit joined four other circuits rejecting the argument that the US DOL could not establish salary thresholds. Amongst other reasons, the Fifth Circuit determined that 1) the DOL has set salary thresholds for over eight years and 2) the DOL, when determining which employees meets the FLSA’s exempt employee tests, my include a salary threshold as a proxy of eligibility at least in part of the general exempt tests.

It is important to note that this decision does not necessarily spell doom for the parties challenging the DOL’s most recent rules. The question the parties are still litigating is essentially whether the DOL’s most recent rule increasing salary thresholds is not relying on salary as a proxy, but instead is effectively replacing the FLSA’s exempt employee tests with a salary test. The Firth Circuit did not address this issue in the Mayfield v. Department of Labor decision.

As noted previously, District Judge Sean D. Jordan has already granted the State of Texas’ motion to temporarily stay the new rules for employees of the State of Texas. In doing, Judge Jordon concluded that the DOL’s newest rules likely violates the FLSA because it is effectively replacing the exempt employee test with a salary test. He determined that the DOL’s new rules would exclude from exempt status many employees who in fact meet the FLSA’s exempt employee tests, an outcome that is contrary to the language of the FLSA. Moreover, although his prior decision predated the Firth Circuit’s Mayfield v. Department of Labor decision, Judge Jordon was aware that a salary threshold was permitted under the FLSA under Wirtz v. Mississippi Publishers Corp., 364 F.2d 603 (5th Cir. 1966)

The Parties Continue to File Motions

As typical for this stage of the process, the parties are continuing to file motions supporting and challenging each other’s arguments. As soon as the motion process has ended, it is likely Judge Jordan will hold a hearing, after which he will issue his decision regarding whether he will issue a temporary order or now.

To stay on top of the progress with motions and hearing, we recommend that you also visit the Court Listener who tracks and makes public all action regarding this issue in real time.

UPDATE AUGUST 27, 2024 – More States Join Texas in Challenging the New DOL Rules

There is still uncertainty whether the US Department of Labor’s new exempt employee salary thresholds rules will survive the legal challenges. However, there has been some meaningful movement that gets us closer to the answer.

Eastern District of Texas lawsuits were consolidated

Two cases were filed in the Eastern District of Texas challenging the DOL’s new rules.

• One case, as discussed in the prior update, involved the state of Texas.
• The other case involved the following businesses and organizations: Texas Restaurant Association; National Association of Wholesaler-Distributors; American Hotel and Lodging Association; Plano Chamber of Commerce; Dase Blinds; National Association of Home Builders; Associated Builders and Contractors; National Retail Federation, Cooper General Contractors; National Federation of Independent Business, Inc.; International Franchise Association; Restaurant Law Center; and National Association of Convenience Stores.

On June 28, 2024, the Eastern District of Texas consolidated both cases to “avoid unnecessary cost or delay, and because the above-captioned cases share common questions of law or fact.”

What makes this consolidation important is not so much that it happened but to which judge the consolidated cases were assigned. They were assigned to District Judge Sean D. Jordan, and Judge Jordan already granted the State of Texas’ motion to temporarily stay the new rules.

Summary judgment motions have been filed

On July 18, 2024, the businesses and organizations challenging the DOL’s new rules filed their Motion for Summary Judgment and on July 25, 2024, the State of Texas filed its Motion for Summary Judgment. The purpose of this motion is to give the Judge an opportunity to determine, based on the facts provided by the parties, whether the DOL’s new rules are contrary to the limitations of the Fair Labor Standards Act as a matter of law.

On August 8, 2024, the US Department of Labor filed its own Motion for Summary Judgment and its opposition to the summary judgment motions of the opposing parties.

Both sides will now be given an opportunity to respond to the other sides summary judgment motions. It is uncertain how long it will take for the parties to file their responses because it is common for parties to request extensions time to file.

Many states have joined Texas challenging the new rules

On August 6, 2024, Judge Jordan granted the following states the ability to file a joint brief challenging the DOL’s new rules:

The impact of the Supreme Court’s Loper case

On June 28, 2024, the US Supreme Court issued Loper Bright Enterprises v. Raimondo. In this case, the Supreme Court overturned its prior Chevron USA v. NRDC decision that granted federal agencies some legal protection from challenges to its interpretations of laws. Without this prior deference and protection, it is reasonable to believe that the DOL’s arguments in favor of the new rules will carry less weight with Judge Jordan than before.

UPDATE JULY 1, 2024 – Uncertainty Persists

On June 28, 2024, Judge Sean D. Jordan of the US District Court for the Eastern District of Texas delayed implication of the US Department of Labor’s new exempt employee rules BUT only for employees of the State of Texas. According to the judge:

In sum, Texas has established that all factors weigh in favor of granting a preliminary injunction,” Jordan wrote. “Texas is likely to succeed in showing that the 2024 Rule is an unlawful exercise of power, Texas will be irreparably harmed absent an injunction, and the balance of equities and the public interest favor preventing unlawful agency action.

As noted, although the judge delayed the new exempt employee rules, the delay applies exclusively to the State of Texas as an employer. In other words, only the State of Texas, as an employer, is permitted to ignore the new DOL rules. This does not apply to any other employers in Texas or any other state, who must comply with the rules.

For everyone except employees of the State of Texas, the new rules became effect on July 1, 2024. However, there are still several lawsuits pending challenging the new rules that still could result in a nationwide delay. Having a federal court already determining the rules are unlawful should carry some weight in the other pending lawsuits; however, other federal district courts are not bound by the conclusions of Judge Jordan, and thus, they could uphold the DOL’s new rules. Thus, for everyone except employees of the State of Texas, the uncertainty continues.

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UPDATE JUNE 24, 2024

According to the ABA Banking Journal, on June 24, 2024:

“A federal court in Texas today held a hearing to consider requests by business groups and Texas Attorney General Ken Paxton for a temporary restraining order to stop the Department of Labor’s overtime final rule from taking effect on July 1.”

This hearing involves Texas v. U.S. Department of Labor, that was filed on June 3, 2024, in the U.S. District Court in Eastern Texas. According to JD Supra:

“Texas asked the court to set aside the minimum salary levels in the 2024 regulations because, like the levels in the 2016 regulations, they ‘would exclude so many employees who perform exempt duties, [that they fail] to carry out Congress’s unambiguous intent.'”