U.S. District Court Invalidates Federal Overtime Rule; Returns Minimum Salary Threshold to ~$35.6K

On November 15, 2024, the U.S. District Court for the Eastern District of Texas issued a ruling invalidating the Department of Labor’s (DOL) entire overtime final rule. In his decision, Judge Jordan acknowledged the DOL’s authority to define the terms of the overtime exemption but emphasized that “this authority is not unbounded.” He noted that the 2024 rule’s minimum salary level “effectively eliminates” consideration of whether an employee performs “bona fide executive, administrative, or professional capacity” duties, replacing it with what amounts to a salary-only test. Furthermore, he ruled that the DOL’s automatic updates to the salary threshold every three years violate the Administrative Procedure Act’s (APA) notice-and-comment requirements.

Judge Jordan’s decision also referenced the Supreme Court’s landmark ruling earlier this year that overturned Chevron deference, which had required courts to defer to “permissible” agency interpretations of statutes, even when judges might interpret the law differently. By rejecting this standard in favor of direct judicial interpretation, the Supreme Court made it easier for courts to strike down agency regulations. Judge Jordan’s reliance on this new precedent strengthens his ruling against the DOL’s authority.

As a result of this decision, the minimum salary threshold for overtime reverts to $35,568, with the threshold for highly compensated employees set at $107,432.  The Biden administration’s rule had aimed to raise the federal minimum salary threshold to $58,656 from $43,888 (the first threshold bump implemented in July), starting January 1, 2025. Under the Fair Labor Standards Act (FLSA), workers performing “executive, administrative, and professional” (EAP) duties are exempt from overtime pay, and for decades, the DOL has used salary level as a key factor in determining this exemption.

The DOL could appeal the ruling to the 5th U.S. Circuit Court of Appeals, known as the most conservative federal appellate court. However, the new Trump administration taking office in January is unlikely to pursue further defense of the rule. Over the next four years, the Trump administration may opt to issue its own overtime rule, as it did during Trump’s first term.

This litigation mirrors the opposition faced by the Obama administration’s 2016 overtime rule, which similarly sought to significantly raise the salary threshold. Notably, the current lawsuit was filed in the same Texas federal district court that reviewed the 2016 rule. In that case, the court intervened just days before the rule’s implementation, ultimately striking it down permanently. The court ruled that the salary threshold was too high, effectively disregarding employees’ job duties if their salary fell below the new minimum. It also prohibited the DOL from automatically increasing the salary threshold without adhering to APA requirements for public notice and comment.

The 4As will continue to monitor and actively engage on this issue (and other labor policy issues) through our participation in the Partnership to Protect Workplace Opportunity coalition.

You can learn more about 4As advocacy efforts on the OT rule here.

*** UPDATE***

On November 26, the Department of Labor appealed the District Court’s ruling vacating the overtime final rule to the 5th Circuit. It remains to be seen whether they will seek a stay pending appeal or move to expedite the appeal.

Have questions about the federal overtime rule or the related litigation? Please contact Amanda Anderson, 4As VP of Government Relations.