On November 15, 2024, a federal judge blocked the U.S. Department of Labor’s (DOL) attempt to raise the minimum salary level for the executive, administrative, and professional (EAP) exemptions from minimum wage and overtime pay under the Fair Labor Standards Act (FLSA). The ruling issued by the Honorable Sean D. Jordan of the U.S. District Court for the Eastern District of Texas applies nationwide, blocking the upcoming increase to the salary threshold, as well as reversing the raise to the salary threshold that went into effect earlier this year. The ruling undermines one of the most significant labor-oriented efforts of the Biden Administration just two months before the upcoming transfer of power to a new presidential administration.
As we reported previously, the DOL issued a final rule in April 2024 that called for a two-step increase to the salary threshold for “white collar” and other highly compensated employees, rendering millions of employees eligible for overtime. On July 1, the first step of this increase went into effect, raising the threshold from $35,568 annually to $43,888 annually. The second step would have gone into effect on January 1, 2025 and raised the threshold to $58,656 annually. In addition, the final rule provided for an increase to the salary threshold every three years, starting on July 1, 2027.
To little surprise, the final rule has faced legal challenges and scrutiny since its issuance. In State of Texas v. United States Dep’t of Labor, the State of Texas and a group of business organizations challenged the rule’s mandates and argued that the Labor Department exceeded its authority when it finalized the final rule in April. Judge Jordan ruled in favor of the State and the business organizations and against the overtime eligibility expansion. In finding that the DOL exceeded its rulemaking authority, Judge Jordan cited the Supreme Court’s July 2024 decision in Loper Bright Enterprises v. Raimondo – which overturned the long-standing Supreme Court decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. and eliminated the deference courts were required to afford to an administrative agency’s interpretation of a statute. As a result of Judge Jordan’s decision, the minimum salary threshold will return to $35,568 unless the DOL, which will be under a new administration in January 2025, successfully appeals the decision.
Although it raised the salary threshold in 2019 during its first term, the Trump Administration is unlikely to continue pursuing the agenda of the current DOL following the inauguration. Notably, the last time the DOL attempted to raise the salary threshold significantly was during the Obama Administration in 2016, and the Eastern District of Texas struck down the final rule in similar fashion. When Mr. Trump was elected, the DOL dropped the appeal of the 2016 decision.
Ballard Spahr’s Labor & Employment Group regularly advises clients on navigating the shifting landscape of DOL regulations and developing wage and hour policies.