Federal Court Vacates the U.S. Department of Labor’s Overtime Rule
The U.S. Department of Labor, Wage and Hour Division (DOL) issued a Final Rule that became effective on July 1, 2024, which dramatically changed the regulations under the Fair Labor Standards Act (FLSA) by increasing the standard salary level for executive, administrative, and professional employees (EAP), increasing the highly compensated employee (HCE) total annual compensation threshold, and allowing for periodic updates of the salary and compensation thresholds in years to come.
However, on November 15, 2024, the DOL’s Final Rule was vacated for all employers nationwide by the U.S. District Court for the Eastern District of Texas. This means that employers are no longer required to increase their employees’ salaries come January 1, 2025. The ruling also vacated the prior initial update on July 1, 2024, along with the automatic updates every 3 years after the initial update on July 1. In other words, applying the district court’s ruling, the current salary threshold for executive, administrative, and professional employees (EAP) exemptions is the previous $684 per week ($35,568 annually) and the current salary threshold for the highly compensated employee (HCE) exemption is the previous $107,432 per year. The district court held that the Final Rule exceeded the DOL’s statutory authority under the FLSA and that the DOL’s Final Rule basically removed the duties test and made it a salary only test by increasing the salary requirements by such a great margin.
The fight is not over, however, because the DOL can still appeal the district court’s decision to the Fifth Circuit Court of Appeal. Considering the overruling of the Chevron deference doctrine, and with the change in presidential administration coming in January of 2025, it seems unlikely that the DOL’s Final Rule would be revived or that the DOL would pursue any appeal of the district court’s decision. For now, employers need not react to the changes proposed in the DOL’s Final Rule but should stay updated with any future legal proceedings that arise, such as an appeal to the Circuit Court by the DOL challenging the district court’s ruling. Further, employers should consult with legal counsel before rescinding any changes made because of the July 1, 2024 increase to discuss the practical implications of the same.
If you have questions about how to proceed considering the Final Rule being set aside or the possibility of an appeal of the district court’s ruling, feel free to contact attorneys Marc Fishel or Benjamin Humphrey at mfishel@fisheldowney.com and bhumphrey@fisheldowney.com.