Challenges to DOL Overtime Rule (Effective for *Almost All Covered Employers July 1, 2024)
Most employers in the United States will start the month of July with a higher salary requirement to exempt certain employees from minimum wage and overtime under the Fair Labor Standards Act (FLSA). However, a June 28th ruling from a federal court in Texas has blocked the salary increase for employees of the State of Texas and has forecast that a more expansive court order might be forthcoming.
With some exceptions, employees are presumptively entitled to minimum wage and overtime protections under the FLSA. Some of the most common exemptions from these requirements are the “white-collar” exemptions, which require an employee to (i) perform certain types of duties in the course of their employment, (ii) be compensated on a salary basis, and (iii) earn above a certain salary level threshold.
In April 2024, the U.S. Department of Labor (DOL) published a final rule that increases the salary level thresholds for these white-collar exemptions. The first salary threshold increase, from $35,568 per year to $43,888 per year, takes effect July 1, 2024, and includes an automatic updating mechanism on January 1, 2025, on July 1, 2027, and again every three years thereafter. Read our client alert regarding the final rule and the salary threshold increases here.
The new DOL rule has been challenged in court by several federal lawsuits. One such challenge is the case State of Texas v. United States Dep’t of Labor et al, Case No. 4:24-cv-00499 (E.D. Tex. June 3, 2024). In that case, Texas moved for a preliminary injunction, asking the United States District Court for the Eastern District of Texas to either temporarily prevent the DOL from enforcing the increased salary thresholds, or to postpone the July 1, 2024, effective date while the case makes its way through the court system. The court held a hearing on that motion for preliminary injunction on June 24, 2024.
On June 28, 2024, the court granted part of Texas’s motion for a preliminary injunction, finding as part of its ruling that Texas is likely to succeed on the merits of its case challenging the DOL’s ability to enact the new salary threshold rule. However, the court issued the injunction as to only the State of Texas, and not to other employers. In effect, the court’s ruling temporarily blocks the DOL from enforcing the new rule against only the State of Texas as an employer. This means that July 1st remains the effective date for any employer who is not the State of Texas.
On the same day, the court consolidated the Texas case with similar litigation filed by a group of private business groups and associations. It remains to be seen how this court, and other courts managing similar challenges to the DOL rule, will ultimately rule as to the validity of the new requirements. For now, however, the new salary threshold rule goes into effect for all covered employers other than the State of Texas on July 1, 2024.
We are continuing to monitor challenges to the new salary threshold rule as they develop. In the meantime, employers should work with counsel to audit each employee’s FLSA classification and to identify any changes that must be made to meet current or anticipated exemption requirements. Our labor and employment team is available to assist with employer audits and recommendations for next steps.
For assistance on any of these issues, please contact a member of our Labor & Employment Team.