Key Takeaways:
- A federal court has found that the Department of Labor exceeded its statutory authority in issuing a 2024 final rule increasing the salary thresholds for federal overtime exemptions.
- The 2024 rule is void and need not be followed.
- With the upcoming change in administrations, the Department of Labor is unlikely to seek an appeal of the federal court's decision or take any other action to revive the rule.
On November 15, 2024, a federal judge sitting in the Eastern
District of Texas found that the Biden administration's
Department of Labor (DOL) exceeded its statutory authority by
issuing its April 23, 2024 final rule (the 2024 Rule) on the Fair
Labor Standards Act's (FLSA) executive, administrative,
professional, and highly compensated employee overtime exemptions.
The 2024 Rule, which we explained in more detail in a prior publication, substantially increased the
salary thresholds for the FLSA's so-called "white
collar" or "EAP" overtime exemptions and
incorporated an automatic indexing mechanism to increase those
salary thresholds every three years starting in 2027. After
concluding that the DOL had exceeded its authority, Judge Sean D.
Jordan vacated the 2024 Rule nationwide.
Judge Jordan's recent decision is yet another installation of
the DOL's failed attempts to increase the salary thresholds for
the FLSA's overtime exemptions. In 2017, a court permanently
enjoined the Obama administration's Department of Labor's
final rule (the 2016 Rule), which, like the 2024 Rule, increased
the salary thresholds for the EAP and highly compensated employee
overtime exemptions and sought to install an automatic indexing
mechanism so that the salary thresholds would continue to increase.
After the 2016 Rule was challenged, the court found that the DOL
had exceeded its statutory authority by increasing the salary
thresholds so substantially that made a worker's salary, rather
than a worker's duties, dispositive of whether the worker was
entitled to overtime under the FLSA. The first Trump administration
then issued a regulation that provided for smaller increases to the
threshold[s].
Judge Jordan reached the same conclusion with respect to the 2024
Rule, writing "the 2024 Rule's salary thresholds
'effectively eliminate' consideration of whether an
employee performs 'bona fide executive, administrative, or
professional capacity' duties in favor of what amounts to a
salary-only test. And, as this Court previously held,
'[n]othing in [the FLSA] allows the [DOL] to make salary rather
than employee's duties determinative" of whether workers
are entitled to overtime under the FLSA. Judge Jordan also found
that the DOL's attempts to install an automatic indexing
mechanism found no support in the text of the FLSA and violated the
procedural requirements of the Administrative Procedures Act, which
requires agencies to proceed through notice-and-comment rulemaking
prior to adopting regulations. Because the 2024 Rule impacted
millions of employees and employers across the country, Judge
Jordan found that the proper remedy was to vacate the 2024 Rule and
remand it back to the DOL for further consideration.
The decision represents a significant blow to the Biden
administration's labor policies. And with the upcoming change
in administrations, the 2024 Rule is likely dead in the water. The
FLSA's overtime exemptions remains a popular subject, but it
remains to be seen what approach the incoming Trump administration
will take.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
