/>iThe U.S. Department of Labor (DOL) is appealing a U.S. district judge’s recent ruling striking down the agency’s final rule “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees,” which had authorized an increase in the white-collar minimum salary thresholds for exemption from federal overtime requirements.
Quick Hits
- The DOL has appealed a federal judge’s recent decision striking down its increases to the salary thresholds for the white-collar exemptions from the FLSA’s overtime requirements.
- The rule increased the minimum salary to $43,888 per year on July 1, 2024, and effective January 1, 2024, it would have increased the minimum salary to the equivalent of $58,656 per year for the EAP exemption and $151,164 per year for the HCE exemption.
- It is unclear whether the incoming presidential administration will continue to pursue the appeal.
On November 26, 2024, the DOL filed a notice of appeal seeking to overturn the decision in Texas v. Department of Labor. In that case, brought by the State of Texas and a group of more than a dozen business organizations, Judge Sean D. Jordan of the U.S. District Court for the Eastern District of Texas found that the DOL had exceeded its statutory authority with its April 2024 overtime rule.
The DOL had sought to raise the minimum salary for the Fair Labor Standards Act’s (FLSA) overtime exemptions for executive, administrative, and professional (EAP) employees and “highly compensated employees” (HCE). On January 1, 2025, the EAP threshold was set to increase to $1,128 per week, the equivalent of a $58,656 annual salary, and the HCE exemption was set to increase to $151,164 per year.
The decision vacated the 2024 DOL overtime rule in its entirety, including the EAP and HCE threshold increases that went into effect on July 1, 2024, and the part of the rule that would have adjusted the salary thresholds every three years based on up-to-date wage data.
The ruling thus left in place minimum levels set under a 2019 DOL rule, which set the EAP exemption at $684 per week ($35,568 per year) and the HCE exemption at $107,432 per year.
The decision was further significant in that Judge Jordan reviewed the case under the standard of the Supreme Court of the United States’ June 2024 decision in Loper Bright Enterprises v. Raimondo, which held that federal courts must exercise independent judgment in deciding whether an agency acted within its statutory authority.
Judge Jordan found that instead of screening out employees who were obviously nonexempt, the 2024 rule would have classified as nonexempt a significant number of employees who otherwise performed the duties required to classify them for the exemptions. The judge further observed that the DOL’s 2024 increase had come only five years after its last adjustment in 2019, which was much quicker than the DOL’s previous average of adjusting the thresholds only once every nine years.
Next Steps
The DOL’s appeal, while anticipated, is likely to be impacted by the incoming presidential administration and a changeover in leadership at the DOL, which could choose to drop the appeal or take different action on the overtime thresholds. President-elect Donald Trump has named U.S Representative Lori Chávez-DeRemer (R-OR) to serve as the secretary of labor in his second administration, though her nomination must still be confirmed by the United States Senate.
The DOL could also seek to expedite the appeal, but it is unlikely that the overtime rule’s salary threshold increases will be put back on track by January 1, 2025. For now, the DOL’s 2019 salary thresholds remain in force, with the EAP exemption set at $684 per week ($35,568 per year) and the HCE exemption set at $107,432 per year.
