The new federal overtime rule was blocked from applying to employees of the state of Texas on June 28, just days before the rule’s first increase to the salary threshold was to take effect on July 1.
For all other employers in Texas and around the U.S., the rule takes effect in two phases of raising the salary threshold for white-collar exemptions from overtime requirements: first from $35,568 per year ($684 per week) to $43,888 per year ($844 per week) on July 1 and then to $58,656 per year ($1,128 per week) on Jan. 1, 2025. There are to be further automatic increases to the salary threshold every three years, starting July 1, 2027.
In the decision, the U.S. District Court for the Eastern District of Texas stated that the 2024 rule reflects a return to the “unlawful approach” the U.S. Department of Labor (DOL) adopted in the 2016 rule, which the district court halted.
Citing the Supreme Court’s June 28 decision in Loper Bright Enterprises, the district court said the Supreme Court “made clear that ‘courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority.’ ”
A salary threshold for the white-collar exemption aligns with the DOL’s authority under the Fair Labor Standards Act only if the threshold is a reasonable approximation of employees exempted by a duties test, the court determined.
Implementation of the overtime rule will impose significant costs, the DOL acknowledged, but the agency said the costs would be relatively low for Texas. Texas said that 88 employees would be impacted by the overtime rule on July 1 and nearly 4,000 employees on Jan. 1, 2025.
The DOL argued that the court should only have considered blocking the July 1 salary increase, because the other changes—the Jan. 1 increase and automatic updating mechanism—will not go into effect until after the court could consider the merits of the case on motions for summary judgment.
The court rejected this argument. “Since the 2024 Rule is ripe for review, the court finds it appropriate to enjoin all provisions of the 2024 Rule that are likely to be held unlawful—specifically, the changes to the salary-level component of the EAP [executive, administrative, and professional] exemption rule,” the court stated.
It blocked the July 1 salary threshold change; the Jan. 1, 2025, salary threshold change; and the automatic triennial salary threshold change mechanism, pending further order of the court.
In a separate order, the court consolidated the business group challenge filed in May with the Texas case.
We’ve gathered articles on the news from SHRM Online and other outlets.
Emergency Relief
The emergency relief in the Texas case is limited to the state of Texas as an employer only.
“In sum, Texas has established that all factors weigh in favor of granting a preliminary injunction,” wrote Judge Sean Jordan of the U.S. District Court for the Eastern District of Texas. “Texas is likely to succeed in showing that the 2024 Rule is an unlawful exercise of power, Texas will be irreparably harmed absent an injunction, and the balance of equities and the public interest favor preventing unlawful agency action.”
The state said the increase in the salary threshold would drive up payroll costs.
Duties Test Should Be the Focus
Jordan held that the DOL had overstepped its authority by effectively rewriting federal law when it raised the salary threshold for the white-collar exemptions.
“Since the ordinary meaning of the EAP exemption focuses solely on duties, any rule implementing the EAP exemption—including the 2024 Rule—must likewise center on duties,” the judge wrote.
(Reuters)
DOL’s Authority Challenged
When the state of Texas filed its lawsuit against the DOL in the U.S. District Court for the Eastern District of Texas, it argued that the department lacked statutory authority to add any minimum salary requirement to the white-collar exemption. The court noted that this argument was rejected by the U.S. District Court for the Western District of Texas in a separate case (Mayfield v. United States Department of Labor, No. 1:22-CV-792), but that ruling has been appealed to the 5th U.S. Circuit Court of Appeals.
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