Overtime Rule Litigation FAQ

On April 26, 2024, the U.S. Department of Labor (DOL) promulgated a final rule entitled  Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees (Overtime Rule), which:

• Raised the minimum salary threshold for an exemption for executive, administrative, and professional workers from overtime pay requirements under the Fair Labor Standards Act (FLSA);
• Increased the percentile of weekly earnings data on which the threshold is based from the 20th percentile to the 35th percentile of full-time salaried workers in the lowest-wage Census Region; and
• Put into place an automatic updating mechanism that would allow DOL to increase the salary thresholds every three years to the new 35th percentile.

Several lawsuits were subsequently filed challenging the final rule, including one initiated by the state of Texas, alleging DOL exceeded its authority under the FLSA. On June 28, 2024, the U.S. District Court for the Eastern District of Texas entered a preliminary injunction which prevented DOL from implementing and enforcing the rule against Texas as an employer. However, for all other U.S. employers, the first salary level increase went into effect on July 1, 2024. After its ruling, the court consolidated that lawsuit with another lawsuit challenging the rule filed by a coalition of trade associations and employers.

On November 15, 2024, the federal district court issued an order vacating the rule nationwide, holding that DOL had indeed exceeded its authority under the FLSA. Below, please find answers to a few frequently asked questions since the court’s ruling.

Frequently Asked Questions

What did the court decide?
The U.S. District Court for the Eastern District of Texas issued a final judgement in the Overtime Rule litigation, finding the Department of Labor exceeded its authority under the Fair Labor Standards Act and striking down the entirety of the final Overtime Rule.

Is this ruling applicable to a specific circuit or geographic region?
The preliminary injunction that applied exclusively to the state of Texas was only applicable pending the outcome of the case. The final ruling applies to employers and employees nationwide.

What does the federal district court ruling mean for both the salary threshold increase that became effective on July 1, 2024 and the proposed January 1, 2025 increase?
Both increases and the automatic indexing were invalidated by the court.

What salary threshold should employers use now in determining overtime payments for employees?
Employers should use the salary threshold that was in place prior to July 1, 2024 ($684 per week/$35,568 annually).

What options does the DOL have?
DOL may choose to appeal the district court’s decision to the Fifth Circuit Court of Appeals, but given the upcoming transition, the Biden Administration may also direct DOL to rescind the rule without pursuing an appeal of the court’s decision.

What will the Trump Administration do in light of this ruling? 

The Trump Administration may choose to do nothing further or may direct DOL to engage in further rulemaking that is consistent with the court’s ruling.