Labor Department Appeals Decision that Halted OT Final Rule

While you spent Black Friday hunting down doorbuster deals on televisions, phones, clothes and mattresses, the U.S. Department of Labor (DOL) was busy trying to keep its overtime salary threshold final rule afloat.

In a succinct 60-word notice filed on Friday, Nov. 26, in the U.S. District Court for the Eastern District of Texas, the agency appealed a federal judge’s Nov. 15 decision in the case State of Texas v. Department of Labor.

In that court case, initiated by the State of Texas and more than a dozen business organizations, Judge Sean D. Jordan determined the DOL exceeded its statutory authority with its April 2024 final rule, which sought to:

Raise the minimum salary for exemption as an executive, administrative or professional (EAP) employee under the Fair Labor Standards Act (FLSA) and, in doing so, expand access to overtime pay to an estimated 5 million American workers who had been classified as salaried (or exempt) by their employer.
Increase the total annual compensation level for exemption as a “highly compensated employee” (HCE) under the FLSA.

A Legislative, Judicial and Executive Collision

Was the DOL’s appeal anticipated? Yes. It was simply a matter of when it would occur.

Will this revive the killed rule? That appears to be unlikely.

The salary threshold jumps, qualification criteria and automated escalator provisions within the 2024 rule likely will not align with the pro-business posture of President-elect Donald Trump’s incoming administration.

The DOL final rule mandated that employees (in most cases) who are classified as exempt from overtime by their employer make at least:

$43,888 in base salary beginning on July 1, 2024 (up from the previous $35,568 annual standard outlined in the DOL’s 2019 final rule), and
$58,656 in base salary beginning on Jan. 1, 2025.

Such salary thresholds were to be implemented regardless of whether employees in question otherwise perform duties qualifying them for the EAP exemption.

Toward the HCE exemption, the DOL’s 2024 rule mandated that classified workers make at least:

$132,964 in total annual compensation on July 1 (up from the previous $107,432 outlined in the 2019 final rule), and
$151,164 on Jan. 1, 2025.

Jordan’s Nov. 15 decision served to:

Quash the Jan. 1 threshold increases;
Rescind the July 1 increases;
Eliminate another increase slated for July 1, 2027; and,
Nix the automatic “escalator” provision, which would have raised the thresholds every three years going forward, starting with the July 1, 2027, compliance date.

So, where does this all go from here?

A New DOL Leader May Determine the Appeal’s Fate

An impending shakeup at the DOL may add a twist to this whole situation.

President-elect Trump already has taken steps toward changing the leadership at the DOL, naming House of Representatives member Lori Chávez-DeRemer, a Republican from Oregon, to serve as the Secretary of Labor. While the Senate would need to confirm her nomination, the end is near for Julie Su, who became Acting Secretary of Labor on March 11, 2023, after the resignation of Marty Walsh. Republicans have long decried President Joe Biden’s selection and nomination of Su, a former state labor secretary under California Gov. Gavin Newsom.

The new secretary, with the backing of the new president, could just rescind the appeal.

However, there is a wild card to consider. Chávez-DeRemer is a longtime supporter of unionization and workers’ right to organize. She is one of only three Republicans in Congress who backed the PRO Act, a wide-ranging labor law that would rein in the gig economy and boost workers’ organizing rights. Although Chávez-DeRemer hasn’t publicly disclosed her opinions or intentions toward the 2024 final rule and its subsequent court battles, there is a scenario (potentially a dream for workers and a nightmare for employers) where she is confirmed by the U.S. Senate and continues appealing the Texas court’s decision.

An additional scenario would have the current DOL leadership seeking to fast-track the appeals process, but the success of that seems even more remote.

What’s Happening Outside of the Federal Level

While action (in one way or another) at the federal level is inevitable, employers should also continue to monitor wage-and-hour laws at the state and local level. As shared in previous Workspan Daily articles, five states (Alaska, California, Colorado, New York and Washington), three New York counties as well as New York City have their own salary thresholds for overtime consideration.

For instance:

The minimum salary for executive or administrative employees in New York City is currently $1,200 per week ($62,400 annually) and is increasing to $1,237.50 per week ($64,350 annually) on Jan. 1, 2025.
In California, exempt employees must earn no less than two times the state’s minimum wage for full-time work — which currently equates to $66,560 a year — to meet the state’s EAP employee exemption test.

Additional states (more likely those with Democratic majorities) may take up the cause if the federal fight is quelled.

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