Texas Judge Halts Department of Labor Overtime Expansion, Impacting 4 Million Workers
A recent ruling by a federal judge in Texas has invalidated the Department of Labor’s attempt to extend overtime pay protections to approximately four million workers.
The decision, made by Judge Sean D. Jordan of the United States District Court for the Eastern District of Texas, nullifies the department’s effort to raise the salary threshold for employees exempt from overtime pay under the Fair Labor Standards Act (FLSA), impacting employers and employees nationwide.
The Department of Labor’s 2024 rule aimed to gradually increase the minimum salary level for executive, administrative, and professional (EAP) employees exempt from overtime requirements. The first increase, effective from July 1, raised the threshold from $684 to $844 per week. A further increase scheduled for January 1, 2025, would have raised the threshold to $1,128 per week, with automatic updates every three years starting July 1, 2027.
The initial increase resulted in approximately one million employees becoming eligible for overtime pay, with the planned future increases expected to impact an additional three million workers alongside automatic updates affecting millions more.
The State of Texas and business organizations contested the rule, claiming the Department of Labor overstepped its authority under the FLSA by focusing on salary increases over duties-based criteria.
Judge Jordan highlighted that the FLSA does not specify a minimum salary for EAP exemptions, emphasizing the importance of the duties test in determining exemption status.
The Department of Labor’s reasoning for the increases included adjusting for wage growth and ensuring fair compensation for lower-earning workers based on current economic conditions.
The National Retail Federation (NRF), a plaintiff, praised the court’s ruling, stating that the rules would have hindered employers’ ability to provide tailored benefits to their employees.
NRF’s Executive Vice President of Government Relations, David French, expressed concerns about the potential impact on employee compensation and benefits packages if the rules had been implemented. The Department of Labor has not yet announced whether it will appeal the ruling or provided a comment on the decision.
