A Texas federal judge has struck down the U.S. Department of Labor’s (DOL) expanded overtime rule, which aimed to raise the salary threshold for white-collar overtime exemptions from $35,568 to $43,888 in July 2024 and $58,656 by January 2025. The rule also included automatic adjustments every three years in the future. This ruling nationwide eliminates overtime eligibility for approximately 1 million workers.
How Did We Get Here?
Judge Sean Jordan ruled that the rule exceeded the DOL’s authority under the Fair Labor Standards Act (FLSA), stating that the high salary threshold created a “de facto’ salary only’ test,” disregarding job duties. The court overturned the rule’s automatic escalation provision for adjusting the salary threshold every three years. The decision aligns with previous rulings against similar efforts, citing limits on agency authority reinforced by a recent Supreme Court decision.
DOL Overtime Rule Struck Down: Now What?
Now, employers must now figure out how to process this news and move forward. Some employers may consider reversing salary changes made to meet the July 2024 threshold (the previous threshold was $35,568, below the living wage for SC). Doing that could significantly impact employee morale and compliance with state-specific wage laws (not SC). Therefore, consider this carefully in determining your next steps. Employers also need to consider any information that has already been communicated to potentially impacted employees and their supervisors. Employers should consider the human aspect of these decisions on their employees.
There is some uncertainty ahead including potential appeals by the Biden administration and further adjustments under the incoming Trump administration. Employers should be prepared for potential changes and stay informed about the evolving regulatory landscape. Employers should also remember any state-specific requirements for notifying employees of compensation and employment status changes.
We encourage all employers to consult with legal counsel and HR before making decisions, review exemption statuses thoroughly, and carefully communicate changes to their workforce.
