On November 15, 2024, a federal judge in the United States District Court for the Eastern District of Texas struck down the U.S. Department of Labor’s (“DOL”) April 2024 overtime rule. On July 1, 2024, that rule raised the minimum weekly salary to qualify for one of the Fair Labor Standards Act’s (“FLSA”) white-collar over time exceptions (executive, administrative, or professional (“EAP”)) and the annual salary to qualify one for the highly compensated employees (‘HCE”) exception. Under that rule, those minimums were set to increase again on January 1, 2025. The order from the Eastern District of Texas striking down that rule applies nationwide. Thus, those minimum limits revert back to the DOL’s 2019 rule, which set the EAP exemption at $684/week, or $35,568 annually, and the HCE exemption at $107,432 per year. The DOL has until January 14, 2025 to appeal the ruling to the Fifth Circuit Court of Appeals. Even if the DOL files an appeal before its deadline, it is likely the incoming Trump administration will abandon such an appeal.
DOL’s April 2024 Overtime Rule
In April 2024, the DOL issued an overtime rule that increased the salary thresholds for the FLSA’s EAP and HCE exceptions. On July 1, 2024, per that rule, the EAP weekly salary threshold increased to $844/week ($43,888/year) and the HCE annual salary threshold increased to $132,964. Those thresholds were set to increase again on January 1, 2025 to $1,128/week ($58,656/year) and $151,164/year, respectively.
Challenge to DOL’s April 2024 Overtime Rule
In June 2024, the state of Texas filed a lawsuit against the DOL challenging its April 2024 overtime rule. On June 28, 2024, the Eastern District of Texas granted a preliminary injunction against the DOL’s 2024 overtime rule that enjoined its enforcement against the state of Texas as an employer.[1]
DOL’s April 2024 Overtime Rule Struck Down Nationwide
After the granting of the preliminary injunction, it appeared likely the Eastern District of Texas would strike down the DOL’s April 2024 overtime rule, which it did on November 15, 2024. The court held that the DOL, in its April 2024 overtime rule, exceeded the authority delegated to it by Congress. Specifically the court found that the DOL, through its April 2024 overtime rule, created a salary-only test for determining whether an employee is subject to the EAP or HCE exceptions. But the court determined that nowhere in the authority Congress delegated to the DOL is the DOL permitted to make salary, rather than an employee’s duties, the determinative factor. Thus, the court granted summary judgment to the State of Texas.
In the wake of this decision, the applicable thresholds for the EAP and HCE exemptions revert back to $684/week ($35,568/year) and $107,432/year, respectively. Should an employer choose to unwind the salary adjustments it made previously as a result of the July 2024 threshold change, we would recommend doing so only after consulting with employment counsel given the likely employee relations fallout. Alternatively, employers may elect to leave any prior adjustments in place and monitor any subsequent DOL appeal.
[1] State v. United States DOL, CIVIL NO. 4:24-CV-499-SDJ, 2024 U.S. Dist. LEXIS 114902 (E.D. Tex. June 28, 2024).