On November 15, 2024, the U.S. District Court for the Eastern District of Texas vacated and set aside the U.S. Department of Labor (DOL)’s final regulation increasing the salary threshold for the “white collar” overtime exemption under the Fair Labor Standards Act (FLSA) on a nationwide basis.
The court held that each of the three components of the rule exceeded the DOL’s statutory authority under the FLSA. And given the nationwide scope of the rule, it concluded that the rule is struck down on a nationwide basis, now vacating the rule for all employers nationwide.
Judge Sean D. Jordan of the US District Court for the Eastern District of Texas granted summary judgment against the rule Friday, finding that it went beyond the agency’s authority.
Under the Fair Labor Standards Act, certain “white-collar” workers can be exempt from overtime pay if they are salaried, make more than a certain amount each year, and work in a “bona fide executive, administrative, or professional capacity.”
Jordan found that the overtime rule set the salary piece of the exemption test so high it made other pieces of the analysis irrelevant, like the consideration of a workers’ job duties. That same legal argument was used by the Eastern District of Texas to sink a rule in 2017 that similarly sought to expand overtime pay eligibility to more workers.
“The minimum salary level imposed by the 2024 Rule ‘effectively eliminates’ consideration of whether an employee performs ‘bona fide executive, administrative, or professional capacity’ duties,” Jordan wrote, “in favor of what amounts to a salary-only test.”
The court ruling landed just weeks before the second and largest phase of the rule was due to take effect on January 1, 2025. The first phase of the rule, which went into effect July 1, increased the salary threshold for overtime eligibility to $43,888 from $35,568. That number was then scheduled to go all the way up to $58,656 on January 1, 2025.
This ruling means the former salary threshold is reinstated, so employers may continue to classify white-collar employees as exempt so long as they satisfy the applicable duties test and earn at least $35,568 annually.
Suttle & Stalnaker, PLLC is ready to help you. If you would like more information on how this applies to you, contact Drema Foster, PAFM at dfoster@suttlecpas.com or at 304.343.4126.