Yesterday, several employer groups and associations filed a federal lawsuit in the same court that, in 2017, stymied the U.S. Department of Labor's efforts to change the overtime rules by raising the minimum salary level needed to be exempt from receiving overtime. As I'll explain below, the 2024 plaintiffs have also raised the same arguments that worked seven years ago.
It's déjà vu all over again.
In 2016, the DOL issued a rule that would have increased the minimum salary required to classify executive, administrative, or professional ("EAP") employees as exempt from overtime pay under the Fair Labor Standards Act from $455/week (about $23,660 per year) to $915/week (approximately $47,476 per year), and then automatically escalate the minimum salary level on a triennial basis after that.
However, a federal judge blocked the rule, in part because he believed that Congress defined the EAP exemption concerning duties, which does not include a minimum salary level. Ultimately, this Court prohibited the DOL from increasing the minimum salary for exemption to a level that "essentially make[s] an employee's duties, functions, or tasks irrelevant if the employee's salary falls below the new minimum salary level." Put simply, the DOL should have focused less on wages and more on duties to determine who is overtime-eligible.
Seven years later, the plaintiffs have asked the United States District Court for the Eastern District of Texas to halt a 2024 version of the overtime rule. This one seeks to increase the standard salary level and the highly compensated employee total annual compensation threshold on the rule's effective dates of July 1, 2024, and January 1, 2025. The final rule also provides for future updates of these levels every three years to reflect current earnings data.
The plaintiffs argue that "the Department's 2024 Overtime Rule largely repeats the errors of the 2016 Rule and fails to address the flaws previously identified by this Court. The Department's new EAP salary thresholds far exceed the limits of the statutory authority" without any legal justification. The plaintiffs further allege that "the 2024 Rule includes an unlawful automatic indexing provision that will further increase the EAP minimum salary threshold without ... notice-and-comment rulemaking."
The plaintiffs claim that implementing the rule will result in irreparable harm, especially to smaller employers and non-profits operating on fixed budgets, with employers generally losing "the ability to effectively and flexibly manage their workforces...for frontline executives, administrators, and professionals."
Presumably, the plaintiffs will seek an injunction shortly, after which the court will set a briefing schedule and may rule before the July 1 effective date. A win for the plaintiffs is no guarantee, and employers should consider planning as if the new rule will take effect as scheduled. Determine which employees the rule may impact and prepare to adjust accordingly.
I'll keep you updated on the status of the lawsuit.
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