On November 15, 2024, a federal judge in Texas issued a significant ruling blocking the U.S. Department of Labor's (“DOL”) 2024 rule increasing the salary threshold for overtime exemptions. Judge Sean D. Jordan of the U.S. District Court for the Eastern District of Texas granted summary judgment in favor of the State of Texas and a coalition of business organizations finding that the DOL exceeded its statutory authority under the Fair Labor Standards Act (“FLSA”) and, therefore, the rule was unlawful.
 

• Background: The 2024 overtime rule, introduced by the Biden administration, aimed to increase the minimum salary threshold applicable to the Executive, Administrative, and Professional overtime exemptions under the FLSA from $35,568 to $43,888 (effective July 1, 2024) and to eventually raise it further to $58,656 by January 1, 2025. The rule would also have required automatic updates to this threshold every three years.
• Judge's Findings: Judge Jordan concluded that the DOL exceeded its statutory authority in setting these new salary thresholds, asserting that the Department's changes to the minimum salary level were beyond the scope of its jurisdiction under the FLSA.
• Impact: The ruling represents a significant setback for the Biden administration’s labor policy, particularly in its efforts to increase the number of workers eligible for overtime pay. Businesses, on the other hand, will welcome this ruling as it puts a cap on increasing labor costs for now.
• Nationwide Effect: Judge Jordan vacated the rule meaning that his ruling applies nationwide.

Practical Implications:

• Employers: The ruling struck down the DOL’s updated salary thresholds. Although employers integrated the July 1st salary increases, we know that the January 1st increases will not go into effect unless the decision is reversed on appeal. If the ruling stays in place, then employers may revert back to the pre-rule threshold of $35,568 and make personnel adjustments accordingly. At the same time, employers will certainly have to weigh the impact on employee morale for those employees who received a salary increase on July 1st based on the DOL’s rule.
• Future Developments: While this ruling halts the 2024 overtime rule, it is possible that the Biden administration may seek to appeal or propose a new rule. At the same time, the incoming Trump administration will likely have a different course of action with respect to this rule.

We will continue to monitor this recent development and provide updates as new information becomes available. Please feel free to contact Kemp Smith’s Labor and Employment Department for more information.