On July 1, the U.S. Department of Labor increased the salary level nationwide to qualify for certain overtime exemptions to the Fair Labor Standards Act from $684/week ($35,568/year) to $844/week ($43,888). On January 1, 2025, it will increase again to $1,128 per week or $58,656 per year.
Except for the State of Texas, as an employer.
On the same day that the Supreme Court determined that courts no longer have to defer to an administrative agency’s interpretation of the law when a statute is silent or ambiguous on a particular matter, a federal judge in Texas determined that the DOL’s rule exceeded its authority under the FLSA and is otherwise unlawful.
The FLSA took effect in 1938 and generally requires that employers pay employees minimum wage and overtime of at least one and one-half times the regular rate of pay when they work more than 40 hours in a workweek. However, there are exceptions to that rule. The law says that “any employee employed in a bona fide executive, administrative, or professional capacity” is exempt from the overtime rules. We call them EAP exemptions.
The statute does not define what it means to be “employed in a bona fide executive, administrative, or professional capacity.” So Congress instructed the DOL to define these terms, which it did by delineating the types of job duties and responsibilities that make someone a “bona fide” EAP.
Additionally, since the inception of the Act, the DOL has included a salary component of the EAP exemption. However, while the statute addresses minimum wage, the Act is entirely silent about a minimum salary for EAP exemptions or any associated compensation level.
Initially, the DOL deliberately set the salary thresholds low as a mechanism to screen out obviously nonexempt employees. So, they didn’t materially matter. However, the DOL occasionally strayed. In 2016, the DOL tried to increase the salary from the salary level from $455 per week to $913 per week. That didn’t fly with a Texas federal judge who entered a nationwide injunction, who noted that with its proposed rule, the DOL “exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test.”
In 2019, when the DOL adjusted the EAP level by a much smaller increment, it acknowledged that the EAP test should emphasize duties over salaries “as Congress instructed.”
Fast-forward to 2024, and when the DOL seemingly forgot the lessons of the past by trying to significantly increase the salary level for the EAP exemption by the start of 2025, a second federal judge applied the same logic to block it.
The court’s injunction only applies to the State of Texas as an employer. So, the new rule applies (for now) to everyone and everywhere else. However, expect to see copycat lawsuits across the country.