Federal Judge in Texas Blocks Administrative Rule to Expand Overtime Pay

By: Enaita Chopra, Associate and Charles Meyer, Managing Partner

On Friday, November 15, 2024, in State of Texas, et al. v. U.S. Department of Labor, et al., No. 4:24-cv-499 (E.D. Tex. Nov. 15, 2024), Judge Sean Jordan of the U.S. District Court for the Eastern District of Texas struck down the new Department of Labor (“DOL”) Rule that would have raised the minimum salary for the executive, administrative, and professional (“EAP”) exemptions to the minimum wage and overtime requirements of the Fair Labor Standards Act (“FLSA”).

Less than seven months earlier, on April 26, 2024, the Biden Administration’s DOL promulgated its new Rule to raise the minimum salary thresholds for EAP exempt employees. The Rule was to be deployed in three phases: (1) on July 1, 2024, the minimum salary level increased from $684 per week to $844 per week for exempt employees; (2) on January 1, 2025, the minimum salary level was scheduled to increase from $844 per week to $1,128 per week for EAP exempt employees; and (3) thereafter, the minimum salary level was scheduled to increase every three years, starting on July 1, 2027.

In affirming summary judgment for the State of Texas, the Court held that DOL’s new salary Rule was an unlawful exercise of agency power. In so doing, the Court pointed out that while the DOL has authority to “define and delimit the operative terms” of the exemption, that authority is not limitless. The Court also noted that the DOL may only limit exemptions from “time to time,” which historically has averaged about nine years between regulations. The anticipated changes, including the automatic salary increase, would deviate from the historical norm. Moreover, the Court noted that the rate of the salary changes would cause millions of employees to lose their exempt status, thereby undermining the exemption’s focus on job duties and functions in favor of increased salary thresholds.

While the Biden DOL may elect to appeal the decision, it is unclear they will do so. For starters, an appeal to the Fifth Circuit is far from a guaranteed reversal. Whether the Biden DOL elects to appeal or punt, it also is unlikely that the new threshold salary levels or Rule would be adopted by the new Trump Administration DOL. As such, the Biden DOL’s new salary thresholds are unlikely to remain intact. For now, employers are no longer required to meet the first minimum salary threshold increase that went into effect on July 1, 2024 or to comply with the upcoming January 1, 2025 proposed increase. The prior minimum salary of $684 per week is reinstated. As such, employers who have not yet done so may want to wait on any potential increases in salary that were previously considered solely for purposes of complying with the April 26 DOL Rule.

O’Hagan Meyer will continue to monitor any developments. For further information, contact your O’Hagan Meyer attorney, any attorney in our Wage and Hour group, or the authors of this Client Alert.