The Sophisticated Employer Blog

The United States Department of Labor (DOL) was handed a major loss this month by a federal court in Texas regarding overtime rules for white collar workers.

The DOL previously raised the minimum salary level for white-collar employees exempt from overtime payments to the equivalent of $43,888 per year, with a second increase to $58,656 per year set to take effect on Jan. 1, 2025.
Last Friday, a federal judge in Texas struck down the DOL’s latest attempt to raise the minimum salary thresholds, finding that the rule exceeded the agency’s statutory authority. 

DOL rules require that “white collar” employees exempt from overtime payments meet certain criteria to be considered exempt under the Fair Labor Standards Act (FLSA). One requirement  is a minimum level of annual salary. The State of Texas and more than a dozen business organizations filed suit to block the implementation of the rule. 

Notably, the Texas court reviewed the case under the new standard for agency review outlined in the June 2024 Supreme Court of the United States 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 and may not simply defer to the agency’s interpretation of ambiguities in the law. The Texas court found that the salary basis part of the test cannot subsume the other factors regarding exempt classification, including the “duties” part of the test. 

The ruling vacates the DOL’s rule in its entirety nationwide, including the increase that went into effect on July 1, 2024. As a result, the salary threshold exempt status reverts back to the DOL’s 2019 rule, which set the white-collar salary exemption at $684 per week, or $35,568 annually, and the highly compensated employee exemption at $107,432 per year.  

Employers are advised to contact their employment attorneys for further guidance and information about how to navigate this most recent ruling under the FLSA.