Last week (on November 15, 2024) Judge Sean Jordan of the United States District Court for the Eastern District of Texas vacated and set aside the federal Department of Labor’s (“DOL”) latest regulation setting the minimum salary required to meet the salary basis component of the white-collar exemptions under the Fair Labor Standards Act (“FLSA”). The ruling puts the kibosh on a significant increase to the salary threshold, the net effect of which would render many ostensibly exempt employees nonexempt.

Thus, effective immediately, the salary threshold for a worker to be exempt from the FLSA’s minimum wage and overtime entitlements returns to $684 per week. Employers may adjust their determinations of exempt status accordingly. Of course, those determinations must be made consistent with any state and local laws that may take precedence when it comes to local wage and hour requirements. We’re here to help employers navigate these shifting sands.

We’ve had a few things to say about the recent undulations of the salary threshold. For example, my partner expressed that an increase in the salary threshold may be a good idea. Here, I will weigh in about what I perceive to be a bad legal decision regardless of how I might feel about the underlying policy determination as to how exempt status should be determined.

By way of background, the FLSA entitles workers to the payment of a minimum wage and, if an employee works more than 40 hours in a given workweek, they are entitled to overtime compensation. Most commonly, overtime is computed at 1½ times the regular rate of pay (aka “time-and-a-half”). When Congress passed the FLSA in 1938, it included a provision that exempted certain employees from the FLSA’s minimum wage and overtime provisions. Relevant here are the so-called “white-collar” exemptions that apply to employees who are “employed in a bona fide executive, administrative, or professional capacity. . . as such terms are defined and delimited from time to time by regulations of the Secretary [of Labor].” FLSA § 13(a)(1), codified at 29 U.S.C. § 213(a)(1).

That same year, DOL issued regulations that identified duties that employees had to perform in order for them to be exempt. Two years later, DOL issued more regulations that marked the first appearance of the salary basis test. This nearly 85-year-old test provides that an employee will not be exempt from FLSA coverage unless they earn a salary that is greater than a DOL-established minimum. Unless they earn a sufficiently high salary, workers will not be exempt regardless of what duties they perform on the job (except for some workers such as doctors, lawyers, and outside sales employees who are not subject to the salary test).

Over the years, DOL increased the salary threshold some nine times. Three of the nine increases issued by DOL came in 2016, 2019, and most recently in March 2024. Prior to 2016, the salary threshold was last increased in 2004 at which time the rate was set at $455 per week (or $23,660 annually). The 2016 salary amount was set by the Obama Administration at $913 per week ($47,476 annually). It should come as no surprise that the 2016 regulation was challenged and overturned by a Texas federal court. Thus, the salary test reverted back to the 2004 level. In 2019, the Trump Administration increased the salary from $455 per week to a more modest $684 per week (or $35,568 annually). The Biden Administration adopted new regulations that increased the weekly salary to $844/week ($43,888 annually) effective July 1, 2024 with an additional increase to $1,128 per week ($58,656 annually) effective January 1, 2025. In addition, the 2024 regulation provided for revisions to the rates every three years so that they’re equal to the 35thpercentile of weekly earnings in the census region with the lowest wages.

The Biden Administration’s increase in the exemption threshold, while large, sounded far less aggressive than the Obama rule, which would have doubled the then-current salary threshold that had been set in 2004. The Trump increase sounded like a decent raise over the 2004 rate, but it essentially updated the threshold using the 2004 formula. The Biden Administration’s increase essentially was calculated using the Obama formula, but about 5% lower.

Thus, if you ignore the passage of time and inflation that occurred between the changes, what you’re seeing is a tit-for-tat change in the underlying basis for the rate. In 2004, the rate reflected the 20th percentile of salaries paid in the South. The Obama proposal would have used the 40th percentile of salaries paid in the South. The Trump rate reinstated the use of the 20th percentile of salaries in the South. The 2024 regulation computed the rate to equal the 35th percentile in the South.

If one reads the preambles of the various iterations of these regulations, each one kinda sounds plausible to a lay reader. Indeed, I’d be perfectly comfortable writing a brief to support any of these regulations as appropriate exercises of express congressional grants of executive authority.

Yet, what really happened is that the Democratic Administrations believed that the salary threshold should be equal to the 35th to 40th percentile of the weekly earnings in the South (or whatever region has the lowest wages at any given time. On the other hand, the Republican Administrations adopted the 20th percentile.

There is no question that, for nearly 85 years, DOL has set a minimum salary threshold as one of the factors used to “define and delimit” the white-collar exemptions. DOL’s authority to do so is unchallenged—even in the Texas courts and the Fifth Circuit. Yet, somehow the current decision has determined that the choice of the 35th percentile exceeds DOL’s authority while, somehow, the 20th percentile does not. Ostensibly, this is because a higher salary threshold would cause more workers to be nonexempt and, therefore, improperly subsume the duties test. Whether one agrees with DOL’s conclusion or not, the choice of a percentile and the assessment of the implications of that choice strikes me as a factual determination that is properly left to agency authority that remains entirely proper even under the Supreme Court’s recent rejection of the Chevron Doctrine.

At the end of the day, these salary thresholds are political choices dressed up in the language of regulatory analysis. Guess what? If Congress grants the authority, the President gets to use it in accordance with his or her administration’s policy choices. Here, Congress chose in 1938 to leave all this up to DOL. If people of any political persuasion don’t like what DOL is doing with its authority here, the proper forum is Congress, not the courts. Yet, here, this Court injected itself into what should be a political sphere.