ALERT:  Texas Court Vacates Department of Labor’s 2024 Overtime Rule Nationwide

In yet another blow to the Biden administration’s agenda to increase wages for workers, on November 15, 2024, an Eastern District of Texas judge set aside and vacated the Final Rule on overtime issued by the U.S. Department of Labor (“DOL”), which increased the salary threshold requirements for employees to be considered exempt under the Fair Labor Standards Act (“FLSA”) as either a bona fide executive, administrative or professional (“EAP”) employee or as a highly compensated employee.  In striking down the Final Rule, the court halted its applicability to all employers and employees nationwide. 

As previously reported, the Final Rule increased minimum salaries for EAP and highly compensated employees in three waves, with the first already taking place on July 1, 2024.  The next increases were scheduled to take effect on January 1, 2025, with triannual increases scheduled for July 1, 2027, and thereafter.  The DOL had projected millions of workers would become eligible for overtime pay as a result of these increased salary thresholds.

After an exhaustive review of the history of the FLSA and the DOL’s authority to “define and delimit” its operative terms, the court concluded that the DOL exceeded its authority under the Administrative Procedures Act (“APA”) by increasing the salary minimums so drastically and then including an automatic escalator mechanism in the 2024 Final Rule.  In particular, the court took issue with the fact that the 2024 Final Rule “effectively eliminates” the duties test in favor of the salary minimums, which is contrary to what Congress intended. 

What does this mean for employers?   The salary minimum for EAP employees to be exempt from overtime immediately reverts to $684 weekly/$35,568 annually, as was in effect prior to the Final Rule issuing.  Likewise, the salary minimum for highly compensated employees to be exempt from overtime reverts to $107,432 annually. 

Is the standard going to change again?  The DOL certainly has the right to appeal the decision to the Fifth Circuit Court of Appeals and, potentially, to the U.S. Supreme Court.  Given the potential change in priorities between the outgoing Biden administration and incoming Trump administration, whether those appeals are pursued – let alone are successful – is unknown but certainly not likely at this time. 

What should employers do now? Regardless of any further appeals, this remains an opportune time for employers to review job descriptions and audit compensation terms to ensure employees classified as exempt from overtime meet all aspects of the applicable tests. Jennifer Platzkere Snyder and the rest of the Dilworth Paxson labor and employment practice would be happy to assist with this process.