DOL's New Overtime Rule Vacated by Federal Judge

On November 15, 2024, the U.S. District Court for the Eastern District of Texas struck down the Department of Labor’s (DOL) 2024 overtime rule, which significantly raised the salary thresholds for overtime exemptions under the Fair Labor Standards Act (FLSA). The rule implemented a two-step increase in the standard salary threshold for overtime exemption:

• July 1, 2024: Increase from $684 per week ($35,568 per year) to $844 per week ($43,888 per year). 
• January 1, 2025: Further increase to $1,128 per week ($58,656 per year).
• The rule would have also automatically increased the salary threshold every three years.

The court ruled that the DOL exceeded its authority under the FLSA by establishing salary thresholds so high that they effectively replaced the duties test with a “salary-only” standard, violating the statute’s requirements.

The court's order applies nationwide.

The court’s order vacating the 2024 rule nationwide immediately restores the previous salary thresholds.

What should employers do?

Employers planning to raise salaries or reclassify certain employees do not need to do so – at least not for the purpose of legal compliance with the DOL's 2024 Final Rule. Employers are also permitted to roll back the salaries for employees affected by the July 1, 2024 increase; however, this could cause employee morale and retention issues.

The DOL may seek to appeal the District Court’s ruling to the Fifth Circuit; however, even if the DOL appeals the ruling, the incoming Trump Administration is expected to abandon the appeal.

As always, employers are encouraged to monitor developments.