Last month, the U.S. District Court for the Eastern District of Texas struck down the Department of Labor (DOL) final rule on overtime, meaning that the rule is no longer in effect anywhere in the United States.
This past spring, the final rule changed the procedures applicable to workers’ eligibility for overtime pursuant to the Fair Labor Standards Act (FLSA). The FLSA requires most employers to pay their “non-exempt” hourly workers time and a half (150 percent of their hourly wage) for every hour of work over 40 hours per week.The final rule became effective on July 1, 2024.
In rejecting the final rule, the court concluded that each of its parts exceeded the power given to the DOL by its enabling statute. Because the rule was applicable nationwide, the court concluded that its decision striking down the rule would also apply nationwide. The same court had previously halted the rule’s enforcement, but that decision was only applicable to state employees within the State of Texas. Its latest decision eliminates the rule for employers nationwide.
Here are some quick takeaways from the court’s decision:
- The July 1, 2024 change was also retroactively overturned, meaning that change is no longer in effect. However, that aspect of the decision may have little consequence because employers may be unlikely to unmake the changes they made earlier this year.
- The January 1, 2025 increase will not become effective, meaning that employers planning to accommodate that anticipated increase can allocate those resources elsewhere.
- Finally, the court concluded that DOL’s use of an automatic mechanism to methodically increase the threshold every three years was not allowed.
The salary threshold applicable to the overtime provision of the FLSA has now reverted to the threshold established in 2019.
The court’s decision represents a huge win for PIA’s independent agent members, who were already struggling under the weight of inflation and the part of the change that became effective on July 1. Employers that adjusted employees’ salaries or exemption statuses to comply with the July 1 changes are encouraged to consult with local counsel before rescinding them.
An appellate reversal is possible. However, with the upcoming change in presidential administration, it seems unlikely that the incoming Trump DOL would continue any appeal begun in the waning days of the Biden administration. The new DOL will likely permit the nullification to stand. For now, it is unclear whether the Trump administration plans to revisit the overtime rule in any other capacity in the next few years.