Another Texas-Sized Sigh of Relief! The DOL’s Overtime Rule is Struck Down Nationwide

 As a reminder, whether an employee is exempt from overtime under the Fair Labor Standards Act (FLSA) or Ohio law depends on the amount of guaranteed salary the employee is paid each week and on the duties performed. Not all salaried employees are automatically exempt.

  In April 2024, the U.S. Department of Labor (DOL) announced its final overtime rule, raising the salary basis for overtime exemptions under the FLSA. Under the rule, the salary threshold was increased to at least $844 a week ($43,888 annually) on July 1, 2024. Effective January 1, 2025, the weekly salary threshold was set to increase to $1,128 ($58,656 annually). In other words, any employee making less than the threshold amount would be entitled to overtime when working more than 40 hours per week. And to compound matters, the final rule included a mechanism to automatically update the salary levels every three years, beginning on July 1, 2027.  

Not unexpectedly, the final rule faced legal challenges, similar to those argued each of the last two times the DOL proposed to raise the salary threshold. On May 22, 2024, more than a dozen business groups sued in Texas federal court to block the final rule and to enjoin the July 1, 2024 and January 1, 2025 increases.

  The welcome news to many employers/organizations, especially in middle America, is that on November 15, 2024, a federal judge in the Eastern District of Texas struck down the DOL’s final rule, holding that the DOL had exceeded its rulemaking authority, rendering both the July 1, 2024 and the January 1, 2025 increases invalid and eliminating the scheduled future increases. And to the delight of employers across the country, the court applied its ruling on a nationwide basis.

  What’s next? With the Texas court’s decision, the salary threshold is restored to the prior amount of $684 a week ($35,568 annually). The DOL may appeal the district court’s decision, but with the Trump administration taking office in January 2025, we do not expect the appeal will go forward. The Trump administration could support a more modest increase in the salary threshold, which it has done in the past, but only time will tell. In the meantime, employers in more progressive states (not Ohio) should continue to monitor their state wage and hour laws to stay compliant.