In April 2024, the U.S. Department of Labor (DOL) unveiled a new final rule aimed at reshaping overtime pay eligibility under the Fair Labor Standards Act (FLSA). While it was met with a mix of reactions, it quickly faced significant legal opposition. A pivotal court decision in November may have sealed its fate, and with a new presidential administration set to take office, the rule’s prospects for survival look bleak.
Under the FLSA, many salaried employees are exempt from overtime pay. However, to qualify for exemption, an employee must primarily perform executive, administrative, or professional duties and earn a salary above a federally mandated threshold.
The 2024 final rule proposed:
On November 15, 2024, the U.S. District Court for the Eastern District of Texas struck down the rule, stating that the DOL had overstepped its authority. According to the court, exempt vs. nonexempt status under the FLSA must be based primarily on job duties, not salary. The court ruled that the final rule improperly prioritized salary as the dominant factor. Additionally, the automatic updating mechanism set to begin in 2027 was deemed outside the DOL’s regulatory authority.
The decision was influenced by a broader legal shift: The U.S. Supreme Court’s recent overturning of the “Chevron deference” doctrine. This doctrine had previously given agencies like the DOL significant leeway in interpreting laws. The reversal has emboldened courts to scrutinize and more easily reject agency rules—as seen in this case.
With the court’s ruling, the FLSA salary thresholds have reverted to their prior levels:
For employers that took a wait-and-see approach, this outcome may bring relief. However, many organizations had already taken proactive steps in anticipation of the rule’s implementation, including:
If your organization made any of these changes, it’s crucial to carefully consider your next steps. Reversing classification decisions or rolling back salary increases could trigger discontent among employees and even legal scrutiny. Disgruntled workers might challenge their exempt status, potentially creating further complications.
With a new administration poised to take control, the current appeal filed by the DOL is unlikely to move forward. Employers should anticipate that this version of the overtime rule will be withdrawn. Moving forward:
Staying ahead of evolving regulations is essential for managing compliance and controlling employment costs. Contact us for insights and strategies to align your policies with current law while optimizing your workforce management practices.
If you have any questions about this content, or if you would like more information please contact Jeff Wilkie, Principal of the HoganTaylor Talent practice. More information is also available on the HoganTaylor Talent page of this website.
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