Department of Labor’s (DOL) Overtime Rule blocked by Texas Federal Court
On November 15, 2024, the U.S. District Court for the Eastern District of Texas invalidated the Department of Labor’s (DOL) recent rule aimed at expanding overtime pay eligibility under the Fair Labor Standards Act (FLSA). This decision has significant implications for employers and employees nationwide.
Background of FLSA Overtime Rule
In April 2024, the DOL issued a final rule to increase the salary threshold for the “white-collar” exemptions under the FLSA. The rule proposed raising the minimum salary for exempt executive, administrative, and professional employees from $684 per week ($35,568 annually) to $844 per week ($43,888 annually) effective July 1, 2024, with a further increase to $1,128 per week ($58,656 annually) set for January 1, 2025. Additionally, the rule included provisions for automatic updates to the salary threshold every three years.
In State of Texas, et al. v. United States Department of Labor, Judge Sean D. Jordan ruled that the DOL exceeded its statutory authority by emphasizing salary levels over job duties in determining overtime exemptions. The court held that the substantial increase in the salary threshold effectively supplanted the duties test prescribed by the FLSA, thereby invalidating the rule on a nationwide basis.
Implications for Employers
With the court’s ruling, the salary threshold reverts to the previous level of $684 per week ($35,568 annually). Employers who had adjusted salaries or reclassified employees to comply with the now-invalidated rule may need to reassess their compensation structures. It’s crucial for employers to ensure that employees classified as exempt meet both the duties test and the reinstated salary threshold to maintain compliance with the FLSA.
Next Steps
The DOL may choose to appeal the decision or propose new regulations. Employers should stay informed about potential developments and be prepared to adjust their policies accordingly. Consulting with legal counsel or HR professionals is advisable to navigate these changes effectively.
This ruling underscores the ongoing complexities in wage and hour regulations and the importance of staying current with legal requirements to ensure compliance and mitigate potential liabilities.