By Chase Smith
Updated:
A federal judge in Texas has struck down a recent rule by the U.S. Department of Labor that aimed to extend overtime pay protections to approximately four million workers.
The decision, made by Judge Sean D. Jordan of the United States District Court for the Eastern District of Texas, invalidates the department’s attempt to raise the salary threshold for employees exempt from overtime pay under the Fair Labor Standards Act (FLSA). The ruling applies nationwide, affecting employers and employees across the country.
The Department of Labor’s 2024 rule sought to implement staged increases to the minimum salary level at which executive, administrative, and professional (EAP) employees are exempt from overtime requirements.
The first increase, which took effect on July 1, raised the threshold from $684 to $844 per week. A second increase, scheduled for January 1, 2025, would have elevated the threshold to $1,128 per week. Additionally, the rule included a mechanism for automatic updates every three years starting July 1, 2027.
According to the order, the initial increase resulted in about one million employees becoming eligible for overtime pay. The subsequent planned increases were projected to affect an additional three million workers, with millions more impacted by the automatic updates.
The State of Texas and a coalition of business organizations challenged the rule, arguing that the Department of Labor exceeded its authority under the FLSA.
They contended that the significant salary increases effectively displaced the duties-based criteria established by Congress for EAP exemptions, making salary the predominant factor.
Jordan wrote in his opinion and order that “the FLSA’s text does not specify any minimum salary for an employee to qualify for the EAP Exemption.”
He further stated that while the Department has historically included a minimum salary level in its regulations, this level has always been set “deliberately low” to screen out obviously nonexempt employees without supplanting the duties test.
“By raising the salary level in this manner, the Department effectively eliminate[d] a consideration of whether an employee performs ‘bona fide executive, administrative, or professional capacity’ duties,” Jordan wrote, echoing concerns from a similar 2017 case where a previous attempt to increase the salary threshold was also struck down.
The Department of Labor had justified the increases by citing the need to adjust for wage growth and to ensure that the EAP exemption reflects current economic conditions. The agency stated that the rule was necessary to ensure the lowest-earning workers were being properly compensated for their time.
The National Retail Federation (NRF), one of the plaintiffs, issued a statement applauding the court’s action.
“NRF appreciates the Court concurring with our arguments that the Labor Department exceeded its legal authority in promulgating rules clearly inconsistent with the Fair Labor Standards Act,” said David French, NRF’s Executive Vice President of Government Relations. “The rules, if finalized, would have curtailed retailers’ ability to offer the most flexible, generous and tailored benefits packages to lower-level exempt employees across the industry.”
French added, “NRF opposed these rules from the outset. They would have forced employers to reexamine compensation packages for millions of workers nationwide. Had the rule taken effect, some workers would have lost the status of a managerial position, valuable educational and training experiences, the capability to travel on the employer’s behalf, and/or flexibility as to when, how and where they work.”
The Department of Labor has not yet announced whether it will appeal the ruling.
It also did not respond to a request for comment by The Epoch Times on the court’s decision prior to publication.
