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DEFENDING FLORIDA EMPLOYERS: DETERMINING EXEMPT EMPLOYEES BASED ON SALARY
The Fair Labor Standards Act (FLSA) generally requires employers to pay employees an overtime rate of 1.5 times their regular hourly rate for hours worked in excess of forty hours per week. The FLSA sets out a number of exemptions to the overtime pay requirement for certain types of employees. Some of the most common exemptions are the exemptions for employees employed in an executive, administrative, or professional capacities. Regulations set by the Department of Labor (DOL) define these exemptions and also set a minimum salary threshold for employees to be overtime exempt thereunder. The DOL tried to raise the salary threshold in a recent April 2024 regulation. The threshold would increase from $684 per week to $844 beginning July 2024, and would increase again to $1,128 beginning January 2025. 89 Fed. Reg. 32842 (codified at 29 C.F.R. §§ 541.0–541.710) (DOL Rule). Thereafter, the minimum salary threshold would automatically adjust salary upwards based on a variety of factors. However, on November 15, 2024, a court in the U.S. District Court for the Eastern District of Texas struck down the DOL’s 2024 Rule. The Miami business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.
The court in the consolidated case of Texas v. DOL, Case No. 4:4-CV-499-SDJ (E.D. Tex., Nov. 15, 2024), and Plano Chamber of Commerce v. DOL, Case No. 4:24-CV-468-SDJ (E.D. Tex. Nov. 15, 2024), issued summary judgment in favor of the plaintiffs and vacated the 2024 Rule. In reaching its decision, the court applied the Supreme Court’s recent decision in Loper Bright Enters. v. Raimondo, 144 S. Ct. 2444 (2024), which states that “[c]ourts must exercise independent judgment in deciding whether an agency has acted within its statutory authority.” The court also applied a decision from the Fifth Circuit holding that the DOL cannot enact regulations that “replace or swallow the meaning” of the exemptions by instituting a definition that is fundamentally different than the text and structure of the FLSA. Mayfield v. DOL, 117 F.4th 611 (5th Cir. 2024).
The court found that the 2024 Rule improperly “swallow[s]” the meaning of the exemptions. The court reasoned that the text of the FLSA shows that the applicability of the executive, administrative, and professional exemptions are primarily determined by an employee’s duties, not the employee’s salary. The court additionally found that the DOL’s minimum salary threshold increase would reclassify millions of workers from exempt to non-exempt while also causing an additional three million to become non-exempt. The sweeping effect of the rule would suddenly make salary the determinative factor in whether an employee is exempt or not, instead of the employee’s duties as Congress intended.
The court also found the DOL Rule’s “Automatic Indexing Mechanism,” in which the salary threshold would adjust automatically every three years, violates the requirement that the DOL engage in notice-and-comment rulemaking. The Administrative Procedures Act (APA) requires agencies to go through a notice and comment process before enacting a new regulation. This process requires the agency to first publicize and receive comments about the proposed rule. The court found that the DOL Rule’s automatic adjustments to the minimum salary threshold violates the APA because the DOL would not engage in the notice and comment process before each adjustment.
Thus, for now, the minimum salary threshold for executive, administrative, and professional employees to qualify as exempt from overtime remains $684 per week. It must be noted that, on November 26, 2024, the DOL appealed the district court’s order to the Fifth Circuit Court of Appeals. Thus, employers should continue to monitor the Texas and Plano cases as the Fifth Circuit weighs in on the issue.
The Miami business litigation lawyers of the Mavrick Law Firm also represent clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.