In a highly anticipated decision, a federal district court in Texas ruled on Friday, November 15, 2024 that the soon-to-be effective federal Fair Labor Standards Act (FLSA) Overtime Rule cannot be implemented. The district court held that the Department of Labor (DOL) exceeded its authority by raising the “threshold” salary that employees must be paid before they qualify as being exempt from receiving overtime wages.
The court ruled that the requirements of the Overtime Rule can only be set through a revision that conforms with the Administrative Procedures Act (“APA”) and that the DOL did not follow this process with the Overtime Rule revisions. The newest iteration of the Overtime Rule was scheduled to go into effect on January 1, 2025, and the court decision now negates the rule. Likewise, a salary adjustment that occurred on July 1, 2024, has been nullified for the same reasons. Accordingly, the existing threshold salary required by the Overtime Rule reverts to the one that was created through the APA process in 2019. That amount is now the standard again, which is $684 per week, for a total of $35,558 per year. To read an analysis of the revised rule prior to the district court’s decision, please see the PRINTING United Alliance article here.
While the DOL can appeal this decision, it is not certain if one will be filed. Alternatively, the new incoming administration could decide to withdraw an appeal even if one was pursued.
The Texas court’s decision stated that the DOL actions related to the salary threshold effectively changed the Overtime Rule white-collar exemption to one that was essentially a “salary only” test. This exemption category affects the following employee classifications: Executive, Administrative, Professional & Creative, Computer Professional, and Outside Sales Professionals.
The Overtime Rule was written to have a three-step analysis for employees in these roles to determine if they were eligible for overtime wages. The analysis is designed to consider:
- Salary
- Job category
- Job duties.
The court determined that the attention to salary eliminated the job duties consideration. Because the FLSA speaks specifically about duties rather than salary, the DOL Overtime Rule actions did not conform with the legislation.
The court also held that the automatic increases to the salary threshold did not follow the APA process. Future revisions would need to go through that process each time a salary threshold is increased.
While the federal Overtime Rule has been set aside, employers must comply with state overtime rules if they are in jurisdictions that have established a threshold higher than the reverted federal threshold. Currently, six states have threshold salaries that exceed the federal Overtime Rule standard: Alaska, California, Colorado, Maine, New York, and Washington. Accordingly, the reverted salary threshold of $684 per week/ $35,558 per year does not meet the standard in those states and their threshold salaries must be met or overtime wages must be paid accordingly.
The district court’s decision is a direct result of the Supreme Court decision in Loper Bright Enterprises v. Raimondo, which was issued in June 2024. The Loper Bright decision reversed a longstanding doctrine from a 1984 case called Chevron U.S.A. v. Natural Resources Defense Council, Inc. In Chevron, the Supreme Court decided that federal courts should defer to agency decisions about how to implement and enforce regulations based on their knowledge and expertise. For decades this was referred to in federal courts and rulemaking as “Chevron Deference”. After 40 years, that changed with the Loper Bright decision, in which the Supreme Court ruled that Chevron Deference violated the APA requirement that courts decide all relevant questions of law when reviewing agency actions.
This Overtime Rule is the beginning of what will be a dramatic change in how federal regulations are drafted due to Loper Bright. From this point forward, legislation will need to be very specific about the process and outcomes the legislation is addressing and the authority it is giving an agency to implement regulations to effectuate the process and achieve the desired outcomes.
In this article Adriane Harrison, VP of Human Relations Consulting, PRINTING United Alliance, addresses the Overtime Rule of the Fair Labor Standards Act. More information about labor and employment laws and regulations can be found at the Center for Human Resources Support or reach out to Adriane directly if you have additional questions specific to how these issues may affect your business at: aharrison@printing.org.
To become a member of the Alliance and learn more about how our subject matter experts can assist your company with services and resources such as those mentioned in this article, please contact the Alliance membership team: 888-385-3588 / membership@printing.org