On November 15, 2024, a federal judge in Texas invalidated the U.S. Department of Labor’s latest attempt to raise the salary thresholds for the Fair Labor Standards Act’s (FLSA) white-collar overtime exemption. Texas v. Department of Labor held that the DOL’s April 2024 rule exceeded the agency’s legal authority. The ruling vacates the rule nationwide, reverting the current salary threshold to the 2019 standard of $684 per week ($35,568 annually).

The DOL’s April 2024 rule made three key changes: (1) it increased the minimum salary for the executive, administrative, and professional (EAP) overtime exemption from $684 per week ($35,568 annually) to $844 per week ($43,888 annually) on July 1, 2024; (2) set a further increase to $1,128 per week ($58,656 annually) on January 1, 2025; and (3) implemented additional adjustments to the salary threshold based on updated wage data beginning on January 1, 2027 and every three years after that.

The court’s ruling strikes down the rule’s increases to the minimum salary thresholds. The court found that “the Department’s changes to the minimum salary level in the 2024 Rule exceed its statutory jurisdiction.” This means that the increase in the salary threshold scheduled to become effective on January 1, 2025 will not go into effect. The ruling also invalidated the July 1, 2024, salary increase that was in effect and eliminated the automatic triennial salary adjustments contemplated by the rule. According to the court’s order, the DOL estimated at least one million workers became nonexempt—i.e., eligible for overtime—as a result of the July 1 increase, and an additional three million more workers would become nonexempt under the January 1 increase.

The court noted that the 2024 rule effectively made salary outweigh duties in determining whether the EAP exemption applies even though both elements are part of the test and this “exceeds the DOL’s authority to define and delimit the relevant terms.” The court referenced the U.S. Supreme Court’s decision, Loper Bright Enterprises v. Raimondo (June 2024), which held that federal courts must independently assess whether an agency’s actions fall within its legal authority, rather than deferring to the agency’s interpretation of ambiguous laws.

The court also pointed out that previous increases to the salary threshold occurred roughly every nine years, but the 2024 increases came just five years after the DOL’s last adjustment in 2019. The result, the judge said, would be that large numbers of employees who meet the duties test would have to be classified as nonexempt based solely on salary, undermining the original intent of the FLSA.

The DOL has the right to appeal the decision to the Fifth Circuit, although we suspect that its decision to proceed with an appeal may be influenced by the incoming leadership under the new administration.

Have questions about how this may impact your organization? Give us a shout and we’d love to help.

See Tex. v. United States Dep’t of Labor, No. 4:24-CV-468-SDJ, 2024 WL 4806268 (E.D. Tex. Nov. 15, 2024).

This article is for informational purposes only and should not be considered legal advice. Employers should consult with their counsel if they have any questions regarding this change.

Written by Shelby Taylor and Christie Newkirk from Carrington, Coleman, Sloman & Blumenthal, L.L.P. in Dallas, Texas.