DOL’s Overtime Rule Declared Unlawful

Last week, a federal trial court in Texas ruled that the new overtime rule which significantly raised the salary threshold for the executive, administrative, and professional employees (“white-collar” or “EAP”) overtime exemptions is unlawful. This decision vacates the rule in its entirety. As such, the January 1, 2025 increase to the salary threshold for these exemptions will not go into effect.  

The court explained that while the Department of Labor (DOL) has the authority to establish a salary threshold for overtime exemptions, it went too far. Because the DOL’s substantial increase rendered unexempt at least a third of employees who meet the duties test for the exemptions, the new salary thresholds unlawfully “swallowed” the duties test – a component specifically required by the language of the Fair Labor Standards Act. The court also carefully traced the history of the DOL’s prior salary threshold increases and found that “only five years have passed since the last” increase and “for the first time in 85 years [the new] increase comes when there has been no change to the federal minimum wage.” Finally, the court ruled that the DOL’s attempt to create automatic increases to the salary threshold every three years violates the Administrative Procedure Act. 

Given this ruling, the upcoming January 1 increases to the salary threshold for the executive, administrative and professional employees overtime exemptions (as well as the highly compensated employee exemption) will not go into effect. But the ruling also invalidates the July 1 increases that already went into effect for Nevada employers. As such, we now revert to the salary thresholds that were in effect before the DOL’s new rule ($35,568 per year/$684 per week for executive, administrative and professional employees, and $107,432 per year for highly compensated employees). 

It is possible that the DOL will appeal the trial court’s decision. It is also possible that the incoming Trump administration will officially rescind the rule or adopt a different rule. If you have questions about what to do with overtime exemptions in light of this decision, please contact a KZA attorney. 

KZA Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.