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In April, the U.S. Department of Labor published a final rule titled “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees,” the intended purpose of which was to update and revise the regulations regarding overtime pay requirements for executive, administrative, and professional employees.
In actuality, the rule would raise the minimum salary threshold to $43,888 on July 1, 2024 and then to $58,656 on January 1, 2025, meaning that any eligible employee making under those threshold amounts would be entitled to overtime pay on any work completed over 40 hours in a work week.
Perhaps more relevant to this readership, the final rule would also adjust the special threshold for highly compensated employees, a threshold that reduces the level of needed scrutiny about the duties individual employees must perform to be exempt from overtime eligibility, from $107,432 to $132,964 per year. Both salary thresholds would be automatically adjusted every three years for inflation.
If you experienced déjà vu while reading that paragraph, it is because this same rule revision was attempted less than a decade ago. On May 23, 2016, the Obama administration’s Department of Labor published a final rule with the same title and same intended purpose.
A few months later, 21 states and more than 50 business groups filed a lawsuit in the Eastern District of Texas to block the rule. In November 2016, District Judge Mazzant issued an injunction preventing implementation of the rule pending resolution of the case.
In August 2017, Judge Mazzant granted summary judgment to the business plaintiffs in the litigation, finding that the updated salary test in the final rule was inconsistent with congressional intent because it effectively overrode the duties test. Judge Mazzant, however, made no assessment regarding the general lawfulness of the salary-level test or the DOL’s authority to implement such a test; rather, his opinion was limited to the proposed final rule as drafted.
Unsurprisingly, the 2024 final rule has been met with considerable uproar as to its implications and implementation, and even more discussion about the constitutionality of the DOL issuing such a rule.
Suit was again filed in the Eastern District of Texas and, on Nov. 15, District Judge Jordan invalidated the final rule, finding that the DOL had once again drafted the rule in such a way that it improperly prioritized salary over job duties in determining overtime eligibility.
The Department of Labor has appealed the decision to the Fifth Circuit, but two facts suggest the appeal will be unsuccessful. First, the DOL under the incoming Trump administration may abandon the appeal on its own. Second, in a recent related case, the Fifth Circuit held that while the DOL may consider salary as an objective measure of eligibility for overtime exemptions, the DOL’s authority to do so is not so broad that it can enact rules that replace or swallow the exemptions.
Will a future administration’s DOL attempt to publish another final rule adjusting overtime eligibility? Only time will tell.•
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Taylor A. Gaby and Lindsay A. Llewellyn are associate attorneys with Riley Bennett Egloff LLP, Indianapolis. Opinions expressed are those of the authors.
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