A Texas federal district court struck down new overtime rules under the Fair Labor Standards Act that applied to employers nationwide. The FLSA generally requires covered employers to pay their employees at least the federal minimum wage and requires overtime pay to employees who work more than forty hours in a week. The FLSA includes an exemption for executive, administrative, and professional (EAP) employees in the American workplace. The so-called “EAP Exemption” provides that the minimum wage and overtime requirements in the FLSA shall not apply to “any employee employed in a bona fide executive, administrative, or professional capacity,” as those terms are “defined and delimited” by agency regulations.
At issue here is a rule recently issued by the Department of Labor (Department) that raised the minimum salary at which EAP employees are exempt from minimum wage and overtime pay under the FLSA—thereby changing the exemption statuses of millions of employees.
The State of Texas and a coalition of trade associations and employers (“Business Organizations”) contended that the 2024 Rule’s changes to the salary level exceeded the Department’s authority under the FLSA.
Texas and the Business Organizations contended that the 2024 Rule exceeds the Department’s authority because it increases the minimum salary for the EAP Exemption to a level that effectively displaces the duties-based inquiry required by the FLSA’s text with a predominant salary-level test. The court agreed.
As a result of this displacement, Texas asserted that it would be irreparably harmed and moved for a preliminary injunction. The Court found that the preliminary-injunction factors favored Texas and enjoined the Department from implementing and enforcing the Rule against Texas as an employer. Because the injunction was granted only as to Texas, the 2024 Rule’s salary-level increase on July 1, 2024, applied to all other employers throughout the nation. As a result of this increased salary level, about one million employees’ statuses changed.
Following the preliminary injunction, the court heard the case on the merits. It determined that, while the Department has the authority to define the overtime exemptions, it exceeded its authority with respect to the new rules. According to the court, the 2024 Rule’s salary thresholds “effectively eliminated” consideration of whether an employee performs “bona fide executive, administrative, or professional capacity” duties in favor of what amounts to a salary-only test. However the law does not allow the Department to make salary rather than an employee’s duties determinative of whether a “bona fide executive, administrative, or professional capacity” employee should be exempt from overtime pay.” Therefore, the Department’s changes to the minimum salary level in the 2024 Rule exceeded its statutory jurisdiction. The court determined that the new overtime rules were unlawful and permanently blocked the rule nationwide. Texas v. United States Dep’t of Lab., No. 4:24-CV-468-SDJ, 2024 WL 4806268, at *26 (E.D. Tex. Nov. 15, 2024)
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