Understanding the Implications of the Texas Court Blocking DOL's 2024 Overtime Rule

In November 2024, the U.S. District Court for the Eastern District of Texas vacated the Department of Labor's (DOL) 2024 Final Overtime Rule, which aimed to raise the salary thresholds for exemptions under the Fair Labor Standards Act (FLSA).

Background on the 2024 Final Overtime Rule

The 2024 Final Rule proposed a two-phase increase in the salary thresholds for the executive, administrative, and professional (EAP) exemptions:

• July 1, 2024: Increase from $684 per week ($35,568 annually) to $844 per week ($43,888 annually).

• January 1, 2025: Further increase to $1,128 weekly ($58,656 annually).

Additionally, the rule included provisions for automatic updates to these thresholds every three years, starting July 1, 2027.

Legal Challenge and Court Decision

The rule faced legal challenges, notably from a small business owner supported by the New Civil Liberties Alliance.

On November 15, 2024, Judge Sean D. Jordan ruled that the DOL exceeded its statutory authority by effectively replacing the duties test with a salary-only test for determining exemptions.

The court's decision vacated the rule nationwide, reverting the salary thresholds to those established in the DOL's 2019 rule: $684 per week for the EAP exemption and $107,432 annually for the highly compensated employee (HCE) exemption.

Implications for Employers

Employers should note that the planned January 1, 2025, increases will not take effect.

The current thresholds remain $684 per week for EAP exemptions and $107,432 annually for HCE exemptions.

Employers who have adjusted salaries to comply with the July 1, 2024 increase should consult with legal counsel to determine appropriate next steps.

Future Considerations

The DOL can appeal the court's decision within 60 days.

However, with the incoming administration under President-elect Donald Trump, it is anticipated that the DOL may withdraw any appeal and reconsider the rule.

Employers should stay informed about potential changes to federal and state overtime regulations to ensure ongoing compliance.