Last Friday, a federal judge in Texas issued an order striking down the U.S. Department of Labor’s new overtime rule for the salary threshold increase for overtime pay. I’ve been writing about this rule since September 2023, and it’s been a long and circuitous route to get here.
The U.S. Department of Labor’s Proposed Rule Change for the Salary Threshold Increase: How Did We Get Here?
As I noted back then, the DOL provided notice of its proposed rule in August 2023, which would increase the amount of money that a company must the employee in salary (the salary threshold) in order to claim an exemption from the Fair Labor Standard Act’s overtime pay requirement. The rule would increase the salary level to $844 a week by July 1, 2024 and $1,128 a week by January 1, 2025. Currently, the salary level sits at $684 a week. Basically, the company would have to pay more in salary to its employees in order to avoid an overtime premium payment for hours worked over 40.
The DOL officially issued its new rule in April 2024, with the increase to take effect on July 1, 2024. But within a matter of weeks, a collection of business interests in Texas filed a lawsuit asking the court to strike down the overtime rule. The groups argued that the DOL was exceeding its authority by increasing the salary level so high and so quickly without congressional authorization. The DOL had issued a similar rule in 2016, also to increase the salary level, but the same federal court struck that rule down.
Just before this new rule took effect on July 1, 2024, the Texas federal judge issued an injunction that blocked the rule from going into effect, BUT ONLY FOR TEXAS GOVERNMENT EMPLOYEES. That meant that the rule changes applied to every other company across the nation as of July 1. Other losses followed for the DOL relating to the Fair Labor Standards Act, as the Fifth Circuit Court of Appeals–which covers Texas–overturned another DOL rule relating to tip credits for regularly tipped employees. However, also in September 2024, the Fifth Circuit UPHELD the DOL’s authority to set the salary basis under the FLSA, which boded well for the DOL’s fight on this salary threshold case.
Federal Judge Ruled that DOL Exceeded Its Authority
But in Texas v. Department of Labor (the case we’re discussing here today), the judge acknowledged the DOL’s authority while stating that such authority is not without limit. The judge found that moving the salary amount so much so quickly–far more quickly than previous changes–meant that the DOL exceeded its own authority. Further, the judge looked to a recent important U.S. Supreme Court decision, Loper Bright Enterprises v. Raimondo, which held that courts must use independent discretion when reviewing regulations/rules issued by federal agencies like the DOL. Courts will be less inclined to give federal agencies the benefit of the doubt when reviewing new rules.
Ultimately, the judge’s order vacates the rule nationwide, while rolling back the prior salary threshold increase from July 1. So currently we’re back to the $684/week standard that’s been in effect for several years.
Next Steps for the DOL?
What happens next? Well, the DOL could appeal to the Fifth Circuit (and possibly to the Supreme Court), but with the change in administration coming, there’s a decent change that the new Secretary of Labor under President Trump could decide to drop the issue and not proceed with the appeal. We could also see a more modest increase to the salary threshold proposed, something that would raise the level from $684 at least, but not to the level that proposed by President Biden’s DOL. This is just one of many changes to employment law that we might see under the returning President Trump, which I wrote about in more detail here.
I will, as always, keep you updated on changes especially relevant for South Carolina employees. If you have any questions about whether you have been properly classified as exempt from overtime pay or are owed unpaid wages, unpaid commissions, or unpaid minimum wage, please reach out to our office at (864) 233-4351 or through our Contact Us page.
