iEmployers have been busy preparing and reviewing their exemptions, raising salaries, and/or making updates to their classifications to comply with the new overtime rule promulgated by the Department of Labor (DOL) that went into effect on Monday, July 1, 2024.
As previously reported (see here), the DOL’s overtime rule faced several (and still pending) legal challenges. On June 28, 2024, U.S. District Judge Sean Jordan of the U.S. District Court for the Eastern District of Texas gave the first answer in one of these challenges by issuing a preliminary injunction temporarily halting the DOL’s new rule from going into effect for Texas state employees (and only for those employees).
In issuing the injunction, the court held that the DOL exceeded its authority by raising the salary threshold for exemption and requiring automatic increases every three years. The court stated that the white-collar exemptions are based on job duties, and the new rule improperly made salary predominate over duties for millions of employees, exceeding the DOL’s authority. The court, however, declined to issue a nationwide injunction, and limited its application to the state of Texas as an employer.
Notably, this ruling immediately followed and applied the freshly issued U.S. Supreme Court’s decision overruling the Chevron deference doctrine. The Chevron deference framework required courts to defer to federal agency interpretations of statutes that those agencies administer even when a reviewing court reads the statute differently. With this decision, courts now have greater latitude in interpretation, enabling them to strike down agency rules more freely.
Meanwhile, in another closely watched related case pending in the Fifth Circuit, a different outcome emerged. On Monday, July 1, 2024, U.S. District Judge Sam Cummings of the U.S. District Court for the Northern District of Texas, presiding over Flint Avenue, LLC v. Su, et al., denied the Plaintiff’s request for a preliminary injunction to prevent the DOL’s new rule from taking effect. This matter had been filed by a software company challenging the DOL’s authority to issue salary requirements and seeking preliminary and permanent injunctive relief enjoying the DOL’s rule. The court denied the injunction citing the Plaintiff’s failure to show that the DOL’s overtime rule would cause the company irreparable harm.
The Flint Avenue case is still being considered on its merits, but for now the DOL’s overtime exemption rule remains unblocked and therefore in effect for private employers.
As a reminder, the ruling from the Eastern District of Texas applies exclusively to the State of Texas as an employer. While we anticipate continued legal challenges, for now, all other U.S. employers, including private employers in Texas, are expected to comply with the DOL’s new overtime rule (see here).
As always, we will monitor and provide updates as developments unfold.
