Breaking News – Overtime Rule No Longer Effective

On November 15, 2024, the federal court in Texas v. United States Department of Labor (“DOL”) and Plano Chamber of Commerce v. DOL, consolidated cases in the Sherman Division of the Eastern District of Texas, set aside and vacated the new federal Overtime Rule. The Texas court held that the DOL exceeded its statutory authority delegated by Congress in implementing the Rule. Therefore, the Rule shall not be enforced and is no longer effective.

Unlike its prior ruling, the Texas court made it clear that this ruling is not limited to the Plaintiffs in the consolidated cases but instead applies to all businesses across the country that were covered by the Rule. Consequently, businesses do not need to take any action regarding the increased minimum salary levels that would have become effective January 1, 2025.

The Rule’s initial increases to the minimum salaries that became effective July 1, 2024, are no longer required for the exemptions. Based on the set aside and vacatur of the entire Rule, the current minimum salary for the executive, administrative, and professional exemptions returns to $684 per week (which equates to $35,568 annually) and the highly compensated exemption returns to $107,432 per year.

Thus, employers who altered salary levels earlier this year to maintain exemptions or implemented timekeeping procedures for positions that became nonexempt, should evaluate whether to reverse or revise pay levels, position classifications, and timekeeping and payroll practices to ensure compliance with the current requirements while supporting smart business strategies and maintaining employee morale. For additional guidance, please contact one of our attorneys.

Keep in mind that the DOL might appeal the decision to the 5th Circuit Court of Appeals but based on that court’s recent comments in Mayfield v. DOL that the DOL’s power is not unbounded, it does not seem likely that this would lead to a reversal. Moreover, the recent election results add uncertainty as to future strategies of the DOL.

Williams Parker will continue to closely monitor developments and will provide updates as they become available.