In November 2024, the U.S. District Court for the Eastern District of Texas Invalidated the DOL’s New Overtime Rule – What Does This Mean for Employers?

By: Allison L. Davis and Jesse K. Fishman

On November 15, 2024, in State of Texas v. Dep’t of Labor, 24-cv-468-SDJ, United States District Judge Sean Jordan of the Eastern District of Texas issued a decision invalidating the U.S. Department of Labor’s (“DOL”) final 2024 rule raising the salary threshold for overtime exemptions under the Fair Labor Standards Act (“FLSA”). The Court’s decision has nationwide impact; because of it – at least for now – the DOL’s 2024 Rule is no longer in effect.

What is the DOL’s 2024 Rule and where does it come from? The FLSA is a federal law that creates the right to minimum wage and generally requires that overtime pay of time-and-a-half be paid to employees who work more than forty hours in a workweek. Certain employees who fall under job-duty-specific exemptions as executive, administrative, or professional employees and meet the salary-level test are exempt from these pay requirements (the “EAP Exemption”). See 29 U.S.C. § 213(a)(1).

What is the EAP Exemption? The EAP Exemption is also commonly referred to as the “white-collar” exemption. Job titles and descriptions do not determine an employee’s EAP Exemption status, nor does merely paying the employee a salary. The FLSA does not include a salary threshold for the EAP Exemption. The DOL, which is tasked with implementing the FLSA, has promulgated regulations, including a salary-level test, regarding the EAP Exemption.

What is the salary-level test? To be exempt from overtime pay and minimum wage requirements under the FLSA’s EAP Exemption, an employee must earn at least $684 per week (or $35,568 per year).¹ In April 2024, the DOL issued a rule raising the minimum salary at which EAP employees are exempt under the FLSA (the “2024 Rule”). The DOL’s 2024 Rule was set to make millions of workers – who had previously been exempt – entitled to overtime pay in the United States with no change to their job duties. The 2024 Rule began going into effect on July 1, 2024, in part one of a three-step implementation. Specifically:

• On July 1, 2024, the salary threshold for the EAP Exemption went from $684/week or $35,568/year to $844/week or $43,888/year. Based on contemporary data, approximately one million employees nationwide became nonexempt (and thus eligible for overtime pay) because of this change.²

• On January 1, 2025, the salary threshold for the EAP Exemption would have gone from $844/week to $1,128/week, or about $43,888/year to $58,656/year. The DOL expected this change to impact an additional three million workers, meaning three million additional workers would have been eligible for overtime pay with this change.

• The 2024 Rule includes a mechanism to increase the salary threshold every three years based on earnings data; the first such increase was slated for July 1, 2027.

What led up to the Eastern District of Texas’ November 2024 decision? In response to the 2024 Rule, the State of Texas and a coalition of employers and trade associations (“Plaintiffs”) filed suit against the DOL, contending the DOL exceeded its authority in issuing 2024 Rule. The Court agreed with Plaintiffs. In its decision, the Court considered the history of the FLSA, noting that since its enactment, the DOL previously raised the minimum salary level nine times. In most instances, the DOL followed a reasonable methodology, and refrained from introducing automatic updates to the salary threshold.³ The 2024 Rule, however, would have affected a large number of employees and introduced automatic adjustments to the salary threshold every three years. The Court concluded the DOL “simply does not have the authority to effectively displace the duties test with such a predominant salary-level test.”

What does this mean for employers? The DOL may appeal the recent decision to the Fifth Circuit, but this may depend on priorities for President Trump’s administration. For now, employers need not reevaluate their pay practices under the DOL’s 2024 Rule – it does not apply. Employers who increased employees’ pay pursuant to the 2024 Rule now have the option to reevaluate. However, employers must be cautious as many states (and counties) have overtime laws that are more favorable to workers than the FLSA.⁴

Allison L. Davis, J.D. and Jesse K. Fishman, J.D. are members of Brown & Fortunato’s Labor and Employment law team. They represent clients in a wide range of employment litigation, pre-litigation, and counseling matters, including employment discrimination, non-competition disputes, wage and hour issues, and business disputes. The Employment Law team at Brown & Fortunato can be reached at 806-345-6300. Or contact Allison directly at adavis@bf-law.com or Jesse at jfishman@bf-law.com.

¹States can also provide their own salary-level tests for EAP exemption, overtime pay laws, and minimum wage amounts, as outlined below.
²Per the November 15, 2024 decision, this is no longer in effect, as explained below.
³In the 2016 Rule, like the 2024 Rule, the DOL implemented increases along with a mechanism to automatically update the salary level every three years. In response, twenty-one states and a multitude of business organizations challenged it. The Court granted summary judgment for the Plaintiffs, finding the 2016 Rule was invalid because it “essentially makes an employee’s duties, functions, or tasks irrelevant if the employee’s salary falls below the new minimum salary level.” See Nevada v. U.S. Department of Labor, 275 F.Supp.3d 795 (E.D. Tex. 2017).
⁴For example, many states have daily overtime pay requirements – in other words, certain employees are entitled to overtime pay if they exceed a certain number of hours worked in a day. In Colorado, the minimum salary for the EAP exemptions is higher than the federal standard, and employees are entitled to daily overtime for work over 12 hours in a day.