Overtime rule overturned
The U.S. District Court in the Eastern District of Texas struck down the Department of Labor’s (DOL) final overtime rule. Finalized in April 2024, the rule would have increased the minimum annual salary threshold that determines overtime pay eligibility under the Fair Labor Standards Act.
The court found that the Biden-Harris Labor Department’s 2024 overtime rule’s July 1, 2024, increase was unlawful as well as the scheduled Jan. 1, 2025, increase. Specifically, DOL’s final rule increased the minimum annual salary level threshold for exemption to $43,888 on July 1, and on Jan. 1 it was scheduled to increase to $58,656. In addition, salary thresholds would have been updated every three years starting on July 1, 2027.
In his ruling, Judge Jordan stated that while DOL has the authority to define and delimit the terms of the overtime exemption, “that authority ‘is not unbounded.’” He explained, "the minimum salary level imposed by the 2024 Rule 'effectively eliminates' consideration of whether an employee performs 'bona fide executive, administrative, or professional capacity’ duties in favor of what amounts to a salary-only test.” He also said that the Department’s automatic updates to the minimum salary threshold every three years "violates the notice-and-comment rulemaking requirements of the [Administrative Procedure Act].”
In light of this decision, the minimum salary threshold is once again set to $35,568, and the threshold for highly compensated employees is set to $107,432.
The industry reaction was swift and positive.
From the National Lumber and Building Material Dealers Association:
“This is a victory for NLBMDA and its coalition partners who have repeatedly urged the Biden Administration and DOL to withdraw its new framework for overtime regulations, which disproportionately impacts small businesses and the workers they employ, and is part of coalition efforts reviewing legislative and legal options on behalf of LBM dealers and the small business community."
From Ben Brubeck, president of regulatory, labor and state affairs for Associated Builders and Contractors:
“This decision is the correct one, and an important win for ABC members and the rest of the regulated community. It’s also no surprise. In 2017, this court permanently enjoined the DOL’s 2016 overtime rule on similar grounds, writing that the rule increased the minimum salary level threshold for exemption far beyond a level which the DOL is permitted to adopt.”
From the National Retail Federation ’s Executive Vice President of Government Relations David French:
“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 NLMBDA added that the DOL may appeal the decision to the 5th Circuit, but DOL under the new administration will almost assuredly abandon its defense of the rule. Over the next four years, it may choose to issue its own rulemaking to update the threshold.
