Federal Judge Blocks FLSA Overtime Rule

Mid-November of this year, a federal judge in the Eastern District of Texas blocked the Biden administration’s Fair Labor Standards Act (FLSA) overtime rule which would have raised the minimum salary threshold for executive, administrative, and professional employees, also referred to as “EAP” employees, to qualify as exempt from overtime pay requirements.

Currently, certain EAP employees are classified as exempt from overtime pay requirements if they are salaried, earn more than the minimum salary threshold, and work in a “bona fide executive, administrative, or professional capacity.”  In April 2024, the Department of Labor (DOL) issued a rule that raised the minimum salary threshold in three phases. First, the rule raised the minimum salary threshold to $43,888 per year as of July 1, 2024. Second, the minimum salary threshold was set to increase to $58,656 per year on January 1, 2025. And third, the rule required the minimum salary threshold to be increased every three years beginning on July 1, 2027.  

The court’s decision struck down the rule finding the DOL exceeded its rulemaking authority. This decision blocks the rule from taking effect for employers across the United States   Notably, the decision rescinds the July 1, 2024 salary increase, and therefore, the annual salary threshold for EAP employees reverts back to $35,568.

HCE Employees
The rule had increased the minimum salary threshold for highly compensated employees (HCE) from $107,432 to $132,964 effective July 1, 2024, and to $151,164 effective January 1, 2025. However, the court’s decision struck down these salary increases and the minimum salary threshold for the HCE exemption reverts back to $107,432.

Next Steps
The DOL could appeal the decision to the Fifth Circuit. However, future litigation and attempts to increase the salary threshold are likely to be impacted by the incoming Trump administration.  If you have any questions as to how this decision affects you or your business, please reach out to the employment law team at Woods Fuller.