Earlier this year, we reported that a Texas federal court judge issued a decision halting the new Department of Labor overtime rule, but only on a limited basis, as the ruling only affected the State of Texas in its capacity as an employer of state employees. Private employers in Texas and all businesses in the rest of the country were not affected by the ruling. As a reminder, the new rule increased the minimum salary threshold for workers classified as exempt under the Executive, Administrative, and Professional (“EAP”) exemptions in two phases from the previous $35,568 per year ($684 per week) to $43,888 annually ($844 per week) on July 1, 2024; and $58,656 annually ($1,128 per week) on January 1, 2025.
Last week, the same court issued another decision that drastically expanded this earlier ruling and effectively invalidated the entire rule on a nationwide basis. So, for now at least, the EAP minimum salary threshold is back to $35,568 per year ($684 per week), assuming your work location does not have a higher salary threshold already in place based on state law (Massachusetts and Connecticut do not, but New York and many other states do).
If this all sounds familiar to you, well, it should. Back in 2016, a federal court blocked a similar minimum salary increase nationwide. And, both times, the court relied on similar reasoning. In both cases, the Texas federal court reasoned that the DOL exceeded its authority by increasing the EAP minimum salary threshold by so much. Instead, according to the judge in the recent decision blocking the OT rule, the salary threshold “should be set deliberately low” because its only purpose was “to screen out the obviously nonexempt employees.”
So, What’s Next?
It is possible that the DOL will appeal the decision to the Appeals Court in that jurisdiction (the Fifth Circuit Court of Appeals). However, with a new presidential administration soon headed to Washington, it is likely that new leadership at the DOL will abandon any appeal and let the nationwide ban stand.
Some employers may have already increased salaries to comply with the now defunct increase to $43,888 annually ($844 per week) that went into effect on July 1. Technically, employers could roll those increases back as long as the reduced salary meets the previous threshold of $35,568 per year ($684 per week). But, taking away benefits from employees is sure to go over like a lead balloon, and could lead to employee turnover and/or union rumblings. If you plan to roll salaries back in light of this recent decision, consult with labor and employment counsel before doing so.