Texas Federal Court Strikes Down Department of Labor Rule Raising the Salary Threshold for Overtime Compensation Nationwide

On November 15, 2024, the U.S. District Court for the Eastern District of Texas set aside and vacated the U.S. Department of Labor (DOL)’s final regulation increasing the salary threshold for the "white collar" overtime exemptions under the Fair Labor Standards Act (FLSA). The Court had previously temporarily enjoined enforcement of the rule in the State of Texas only. Now, the ruling has been extended nationwide.

The FLSA requires all employees to be paid minimum wage and overtime compensation for any hours over 40 in a work week. However, the DOL has long exempted certain white collar employees from the overtime requirement if they performed certain duties and met a certain salary threshold. Over time, the rule has been updated to increase the salary threshold.

In April, we reported that the DOL issued final regulations raising the white collar exemption salary threshold from $35,568 per year ($684 per week) to $43,888 per year ($844 per week). This increase became effective on July 1, 2024. The rule also was set to raise the threshold to $58,656 ($1,128 per week) on January 1, 2025. Thereafter, the rule would have automatically updated the salary threshold every three years. This ruling not only blocked the upcoming January 1, 2025 increase, but also rescinded the July 1, 2024 increase.

The court’s 62-page decision held that the rule was in excess of the DOL’s authority because the white collar exemptions are focused on duties rather than salary, whereas the text of the FLSA speaks directly to the duties that the employee performs, not the salary the employee earns. Therefore, the court concluded that pursuant to the Administrative Procedure Act, increases to the salary threshold must be made by federal regulation. The court relied on the U.S. Supreme Court’s June 2024 opinion in Loper Bright Enterprises v. Raimondo, which struck down the Chevron doctrine previously relied upon by federal agencies to issue rules of this nature for the past 40 years. 

Companies no longer need to concern themselves with the January 1, 2025 increase and could revisit any classification of employees in light of the July 1, 2024 rule recission. While the  DOL could appeal this ruling, it seems unlikely that a new DOL appointee under the Trump Administration would pursue the appeal. Please contact Rachel Bossard at 312.840.7029 or Alex Marks at 312.840.7022 if you have any questions about compliance with the DOL salary threshold.