For the second time in seven years, a federal court in Texas has blocked a U.S. Department of Labor (DOL) rule designed to expand overtime eligibility under the Fair Labor Standards Act (FLSA). Judge Sean D. Jordan of the Eastern District of Texas ruled that the DOL exceeded its authority by significantly increasing the salary threshold for exempt employees classified as executive, administrative, or professional (EAP).
The now-invalidated rule, issued in April 2024, sought to raise the minimum salary for exempt EAP employees from $684 to $844 per week, with a second hike to $1,128 scheduled for January 2025. Additionally, the rule introduced triennial automatic increases tied to earnings data, starting in 2027. Judge Jordan vacated the entire rule, deeming it an overreach.
This ruling draws parallels to a similar DOL rule struck down in 2017. Back then, the court concluded that prioritizing salary levels over job duties was inconsistent with Congress’s intent. The latest decision reinforces that stance, emphasizing that the DOL’s focus on salary as a “proxy” for job duties undermines the statutory framework established by the FLSA.
Judge Jordan also leaned on the Supreme Court’s recent Loper Bright Enterprises v. Raimondo decision, which curtailed deference to administrative agencies. This added layer highlights the growing judicial pushback against executive agency authority in regulatory matters.
While the ruling effectively nullifies the July 2024 salary increases, many employers face a practical dilemma. Businesses that raised salaries to $844 weekly may hesitate to reverse these adjustments to avoid damaging employee morale. Meanwhile, states like California and New York continue to enforce much higher salary thresholds for exemptions, which employers must still meet regardless of federal law.
The future of overtime rules under the incoming administration remains uncertain. Historically, Republican administrations have favored more moderate adjustments, such as the Trump-era increase to $684 per week. Employers should watch for new developments while aligning their policies with applicable state laws.
This decision is a critical marker in the ongoing debate over the balance between job duties and salary levels in determining exempt status, as well as the broader limitations of federal agencies in reshaping labor regulations.
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