On July 1, 2024, the first phase of the U.S. Department of Labor (DOL)’s updated overtime rule went into effect, raising the minimum salary threshold for employees who are classified as “exempt” under the white-collar exemptions to the Fair Labor Standards Act (FLSA). The rule is subject to legal challenges but, as detailed below, remains in effect for now (other than for the State of Texas as a government employer).

A full summary of the rule is available here. In short, as of July 1, 2024, employees must be paid $844 per week ($43,888 annualized) to satisfy the salary threshold for the executive, administrative and professional exemptions. To satisfy the highly compensated” exemption salary threshold, employees must be compensated at least $132,964 per year (and a minimum of $844 per week). Effective January 1, 2025, the minimum salary threshold is set to increase to $1,128 per week ($58,656 annualized) for the executive, administrative, and professional exemptions, and to $151,164 per year for the highly compensated employee exemption. From there, the rule provides for updates to the minimum salary threshold every three years, starting July 1, 2027.

As summarized below, three challenges to the rule were filed in federal courts and resulted in a series of rulings over the days leading up to July 1, 2024 effective date:

• In Plano Chamber of Commerce, et al. v. Su, et al., No. 4:24-cv-468 (E.D. Tex.), a group of trade associations and businesses filed a challenge to the rule. Instead of seeking injunctive relief, the plaintiffs requested expedited summary judgment in order to obtain a merits ruling before the rule’s second deadline on January 1, 2025. On June 28, 2024, Judge Sean D. Jordan consolidated the case with the State of Texas case, discussed below, reasoning that the cases share common questions of law and/or fact.
• In State of Texas v. U.S. DOL, No. 4:24-cv-00499 (E.D. Tex.), the State of Texas sought nationwide injunctive relief to prevent the rule from going into effect on July 1, 2024. On June 28, 2024, Judge Jordan granted a limited injunction that blocked the rule from taking effect only as applied to the State of Texas as an employer. While the ruling focuses on the specific harm to the State of Texas as an employer, much of the reasoning is agnostic to public versus private employers, leaning heavily on the FLSA statute’s focus on duties. In one of the first post-Chevron opinions, Judge Jordan reasoned it is likely that Texas will succeed in showing that the DOL should be limited to rulemaking that “center[s] on duties.” Judge Jordan has ordered the parties to confer and file a proposed summary judgment briefing schedule by Monday, July 8, 2024, making it likely that any decision will arrive prior to the January 1, 2025 deadline.
• In Flint Avenue, LLC v. Su, et al., No. 5:24-cv-00130 (N.D. Tex.), a private employer requested a nationwide injunction to block the rule from taking effect on July 1, 2024. In a July 1, 2024 ruling, the court denied the plaintiff’s request and ordered an expedited summary judgment briefing schedule instead, stating its intent to reach a merits determination prior to January 1, 2025. In the order denying injunctive relief, Senior Judge Sam R. Cummings determined the plaintiff did not make a showing of irreparable harm as only one employee would be impacted by the July 1 salary threshold increase and such harm was dubious as the employee had been re-classified after the plaintiff filed suit.

In sum, the updated overtime rule remains in effect for private employers for now. After the recent rulings, however, it appears likely that there will be a summary judgment ruling before the second deadline on January 1, 2025. While there is no guarantee as to the outcome of the potential summary judgment ruling, Judge Jordan noted in State of Texas that it is likely that Texas will succeed on the merits in its challenge to the rule. Further, the recent demise of Chevron’s agency-deference principle increases the court’s ability to find that the DOL’s revised rule is an improper interpretation of the FLSA. Until there is a merits ruling, however, employers should consult with employment counsel on a strategy for compliance with the DOL rule.