In April 2024, the Department of Labor (DOL) issued its final rule raising the threshold salary requirements under the Fair Labor Standards Act (FLSA) for employees classified as exempt from overtime pay when working in excess of forty (40) hours in a seven (7) day workweek, (the "2024 rule"). The 2024 rule, scheduled to take effect July 1, 2024, increases the salary thresholds for the executive, administrative, and professional (EAP) exemptions, and highly compensated exemption (HCE). Specifically, the 2024 rule increases the EAP exemptions from $684 per week ($35,568 per year) to $844 per week ($43,888 per year) effective July 1st, and a subsequent increase on January 1, 2025, to $1,128 per week ($58,656 per year). For the HCE, the salary threshold will increase from $107,432 per year to $132,964 per year on July 1st, and a subsequent increase on January 1, 2025, to $151,164 per year.
Legal Challenges
There is a flurry of lawsuits attempting to invalidate the 2024 rule. Two cases were filed in the United States District Court of the Eastern District of Texas, State of Texas v. DOL filed on June 3, 2024, and Plano Chamber of Commerce, et al. v. DOL filed on May 24, 2024. A motion for injunctive relief was filed in the Texas matter to prevent the DOL from implementing the 2024 rule on July 1st, and the Court has set a hearing date on the motion for June 24, 2024. A small software development and marketing firm, Flint Ave, LLC, also brought a lawsuit challenging the 2024 rule in the United States District Court for the Northern District of Texas on June 3, 2024.
The lawsuits make several arguments against the legality of the 2024 rule. For instance, plaintiffs argue that the Court should set aside the 2024 rule for the same reasons that the Court set aside the Obama-era rule increasing salary thresholds in 2016; that the 2024 rule is "arbitrary and capricious," and notably, that the DOL lacks the rule-making authority to add any minimum salary requirement to the overtime exemptions.
These challenges mimic the 2017 legal challenge filed in the Eastern District of Texas against the Obama-era rule which raised the salary threshold for EAP exemptions to $47,476. Ultimately, the Eastern District Court permanently enjoined the Obama-era rule finding that the salary threshold increase and the mechanism for increasing the minimum salary every three years thereafter was unlawful because it "essentially make[s] an employee's duties, functions, or tasks irrelevant if the employee's salary falls below the new minimum salary level."
Additionally, currently pending in the 5th Circuit Court of Appeals, Mayfield v. DOL, is a lawsuit arguing that the Trump-era rule slightly increasing the FLSA's salary threshold in 2019 to the current salary threshold, is invalid because the DOL does not have authority to consider a worker's earnings when determining whether the employee is exempt from overtime. If the 5th Circuit decides that the DOL is prohibited from using a salary threshold in its determination of exemption status, then the new 2024 rule will be rescinded as well.
The United States Supreme Court will soon issue its decision on a major case – Relentless Inc. v. Department of Commerce, deciding on whether deference should be given to federal agencies, like the DOL, in the interpretation of federal laws that the federal agencies administer. Although this case does not specifically relate to the DOL's 2024 rule, the forthcoming decision may be relevant in determining the measure of rule-making authority held by federal agencies overall.
Next Steps for Employers
The outcome of the discussed lawsuits will play a critical role in determining the fate of the DOL's 2024 Rule. Although there is no clear indication of how the courts will decide, we strongly encourage employers to develop and implement plans to come into compliance with the new salary threshold coming into effect on July 1st. This may include conducting an audit of exempt status employees, and making changes as needed to ensure compliance with the 2024 rule. Our office will continue to monitor all legal challenges and provide updates as appropriate.
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