Attention Employers: Court Vacates New Department of Labor Overtime Rule

On November 15, 2024, U.S. District Judge Sean D. Jordan of the Eastern District of Texas vacated a 2024 United States Department of Labor (“DOL”) rule, which had raised salary thresholds for overtime exemptions as of July 2024 and which mandated future increases to the salary threshold to maintain exempt status beginning in January 2025.

The DOL had estimated that one million employees who had previously potentially been classified as exempt from overtime pay requirements under the FLSA would be deemed non-exempt based on the DOL’s new rule change, and that another three million employees would have had their exempt status changed to non-exempt by the January 2025 increase in salary threshold had the rule not been invalidated by the District Court’s ruling. The DOL’s rule would have also implemented further increases to the salary thresholds every three years thereafter based upon applicable earnings data provided by the government.

The recent court decision was handed down after the State of Texas and several business groups challenged the efficacy of the DOL’s 2024 rule. While district court decisions of this type are almost always appealed to the Circuit Court of Appeals with jurisdiction over the district court in question, it is unclear whether the DOL will appeal this new district court ruling considering the imminent change in administrations. 

Employers in several populous states with their own rules with respect to overtime exemptions will be unaffected by any changes in the DOL minimum salary thresholds for the EAP exemption since in those jurisdictions, minimum salary threshold levels far exceed the $684 per week that has now been restored by the Court’s decision. 

From a practical standpoint, fluctuations in the minimum salary threshold for overtime exemptions highlight the risks associated with paying employees at exactly the minimum salary threshold. Employers, especially multi-state employers, should review all applicable federal and state wage and hour laws to ensure that their pay practices are consistent with current applicable federal, state and local law.  

Our Labor & Employment Law team is available is available to assist employers in navigating wage and hour classification issues and compliance with federal, state and local labor laws, including evaluating workforce exemption status and overtime policies.

For more details, see our Client Alert below.