On June 28, 2024, a Texas Federal Court became the first to block enforcement of the Department of Labor’s (“DOL”) new rule raising the salary threshold for white-collar exemptions under the Fair Labor Standards Act (“FLSA”). Importantly, however, the Texas Court’s Order is expressly limited to enjoining enforcement of the rule against only the state of Texas as an employer (it does not apply to any other private employer in Texas or elsewhere). Consequently, these new salary thresholds went into effect for all other employers as of July 1, 2024… at least for now, as there are other legal challenges pending and likely more to come.
Background
As we noted in our April 30, 2024 Alert here, the DOL announced its final rule expanding the FLSA’s overtime protections for workers by increasing the salary thresholds required to exempt a salaried bona fide executive, administrative or professional employee from overtime pay requirements. Specifically, the minimum salary level for all white-collar exemptions increased from $684 per week ($35,568 per year) to $844 per week ($43,888) on July 1, 2024. In addition, the total annual compensation requirement for the highly-compensated employee exemption increased from $107,432 to $132,964 on July 1, 2024.
The Texas Ruling and Its Implications
In Texas v. Department of Labor, the Eastern District of Texas addressed whether the DOL’s overtime rule exceeded its authority under the FLSA. Just prior to the effective date of the new DOL rule on July 1, 2024, the Texas Court granted a preliminary injunction to block the rule requested by the State of Texas and consolidated another challenge filed by other business groups. The Texas Court held that the State of Texas is likely to succeed in demonstrating that the rule exceeds the DOL’s authority under the Administrative Procedure Act because the FLSA’s white-collar exemptions are based on employees’ salary and not their job duties. Although the State of Texas sought a nationwide injunction, the Texas Court, contrary to its past decisions, expressly limited the relief to the state of Texas as an employer (excluding all other employers and/or geographic territories from its current applicability). Although this initial Texas decision is limited in scope, allowing the Rule to currently be in effect for everyone and everywhere else, this decision could foreshadow a similar result in other pending cases seeking broader relief.
Takeaway
The Texas decision and other ongoing legal challenges raise broader questions about the DOL rule and its authority to set salary thresholds for the white-collar overtime exemption. We will continue to monitor and provide updates as this issue evolves.
