Update on U.S. Department of Labor (DOL)’s Overtime Rule

As we previously alerted you, as of July 1, 2024, the U.S. Department of Labor (DOL) instituted a significant change affecting the Fair Labor Standards Act's (FLSA) overtime rules. The new overtime rule increases the minimum salary threshold for employees to qualify for the white-collar exemption from overtime pay requirements.

The new rule has generated mixed reactions. Proponents argue that it ensures fair pay for overtime work. Critics, including many business groups and the state of Texas, contend that the increased threshold will significantly raise payroll costs and lead to job cuts.  To address these concerns, the state of Texas sued the DOL and, in June, filed for a preliminary injunction against the rule, arguing that it would cause irreparable harm by increasing state payroll expenses and straining budgets. On June 28, 2024, a federal judge in Texas granted a preliminary injunction, halting the rule's implementation and enforcement against the state of Texas as an employer.

Private sector employers and other states still remain subject to the new rule.

On August 1, 2024, an amicus brief supporting Texas’s arguments was submitted by the attorney general of the state of Arkansas, which was joined by the attorneys general from Alabama, Georgia, Idaho, Indiana, Iowa, Louisiana, Mississippi, Montana, Nebraska, Ohio, Oklahoma, South Carolina, and West Virginia.

We will continue to keep you apprised of the legal proceedings on this topic.  The impact of these proceedings and the arguments being made in court could affect the remainder of the implementation of the rule on January 1, 2025.

Under the FLSA, the white-collar exemption applies to certain executive, administrative, and professional employees who meet specific criteria, including being salaried and earning above a set threshold. Prior to the DOL's rule, the threshold was $35,568 annually. Employees who met these criteria were exempt from overtime pay, meaning they did not receive time-and-a-half for hours worked beyond 40 per week.  The DOL's final rule raised the minimum salary threshold to $43,888 as of July 1s. Starting January 1, 2025, this threshold will increase to $58,656, with subsequent updates every three years. This change expands overtime eligibility to millions of additional workers.