November 20, 2024

On November 15, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide injunction halting the new U.S. Department of Labor (DOL) overtime rule, which aimed to expand overtime eligibility for millions of workers. As a result, the rule's planned increase in the salary thresholds for Fair Labor Standards Act (FLSA) overtime exemptions, set to take effect on January 1, 2025, will no longer be implemented. Additionally, the salary level adjustments that were to go into effect effective as of July 1, 2024, have now been nullified.

The DOL's final rule, announced on April 23, 2024, raised the minimum salary level for employees to be exempt from FLSA overtime requirements. The rule increased the threshold from $684 per week ($35,568 annually) to $844 per week ($43,888 annually) on July 1, 2024, with a subsequent increase to $1,128 per week ($58,656 annually) scheduled for January 1, 2025. It also impacted the highly compensated employee exemption, raising the total annual compensation requirement from $107,432 to $132,964 on July 1, 2024, with a planned increase to $151,164 on January 1, 2025.

The court ruled that the DOL exceeded its authority in implementing the rule, particularly with respect to setting salary levels high enough to override other exemption criteria. The court argued that the rule created an excessive focus on salary rather than on an employee's duties, which the law intended to be the primary factor in exemption determinations. The court also blocked the automatic salary threshold increases scheduled to occur every three years, citing a failure to comply with the Administrative Procedure Act.

The DOL has the option to appeal the court's ruling, although the incoming Trump administration could choose to abandon the appeal, allowing the court's ruling to stand. In the meantime, employers should assess how this ruling affects their workforce exemption classifications and salary levels, in particular those employers who had already implemented salary increases for compliance with the July 1, 2024 mandate, or who were preparing for the January 1, 2025 changes.