Federal Judge Strikes Down OT Final Rule, Salary Threshold Increases

Editor’s Note: This is a developing story. Check back to Workspan Daily for updates and additional information. Last updated: 10:50 a.m. Central on Monday, Nov. 18.

On Friday afternoon, Nov. 15, a federal judge in Texas blocked the U.S. Department of Labor’s nationwide final rule that would have:

Raised the minimum salary for exemption as an executive, administrative or professional (EAP) employee under the Fair Labor Standards Act (FLSA); and, in doing so
Expanded access to overtime pay to an estimated 5 million American workers who had been classified as salaried (or exempt) by their employer.

Judge Sean D. Jordan, presiding in the case of State of Texas v. United States Department of Labor in the U.S. District Court for the Eastern District of Texas, said the government agency went beyond its authority when implementing the April 23 final rule. His decision came one week after hearing oral arguments in the case.

The same district court and judge on June 28 had blocked the rule from being implemented in the state of Texas.

The Department of Labor (DOL) final rule had been grounded in a salary basis test that stipulated, in most cases, that employees classified as exempt from overtime by their employer make at least:

$43,888 in base salary beginning on July 1 (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 thresholds were to be implemented regardless of whether employees in question otherwise perform duties qualifying them for the EAP exemption.

According to employment law firm Littler Mendelson P.C., the Friday court decision:

Nullifies the Jan. 1 threshold increase;
Rescinds the July 1 increase; and,
Nixes the DOL rule’s automatic “escalator” provision, which would have increased the threshold every three years going forward.

The 2019 threshold of $35,568 — set under the first Trump administration — is poised to go back into effect, according to reports.

In making his decision, Judge Jordan lent credence to the Court of Appeals’ recent decision in the case Mayfield v. Department of Labor, which held the DOL’s authority to “define” and “delimit” the terms of the EAP exemptions includes the power to set a minimum salary for exemption.

While recognizing the agency’s authority to consider salary level in defining the exemptions, Jordan noted such authority was not unbounded, stating, “Using salary as a proxy for EAP status is a permissible choice because … the link between the job duties identified and salary is strong. That does not mean, however, that use of a proxy characteristic will always be a permissible exercise of the power to define and delimit. If the proxy characteristic frequently yields different results than the characteristic Congress initially chose, then use of the proxy is not so much defining and delimiting the original statutory terms as replacing them.”

Jordan called out specific language from Mayfield in distinguishing between the 2019 and 2024 rules.

“As Mayfield makes clear, the [DOL] cannot use a proxy characteristic (salary) to measure eligibility for the EAP exemption[s] when it will ‘frequently yield different results than the characteristic Congress initially chose,’ i.e., duties,” he stated. “The [DOL’s] attempt to do so in the 2024 Rule demonstrates that its use of the salary proxy is not so much defining and delimiting the original statutory terms as replacing them.”

Attorneys at Littler advised employers to consult with counsel before rescinding any changes made by the now-invalidated July 1 increase. Employers should also be aware that five states (Alaska, California, Colorado, New York and Washington), three New York counties as well as New York City have their own salary thresholds.

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