On November 15, 2024, Judge Sean D. Jordan of the United States District Court for the Eastern District of Texas issued judgment in favor of challengers to a recent United States Department of Labor rule that increased the salary thresholds for certain overtime exemptions.
We previously covered this new DOL rule before it was finalized. As we anticipated, it faced legal challenge once finalized. Now the rule has been vacated and set aside.
In his 62-page decision, Judge Jordan tossed out the recent DOL rule because it exceeded the agency’s authority to “define and delimit” the terms of the overtime exemption. Judge Jordan looked meticulously at the history of agency rulemaking in this regard before concluding the recent rule constituted an unlawful exercise of agency power.
Judge Jordan took issue with the DOL effectively “displacing” the duties test with the salary test by increasing the salary threshold so significantly: “Recall the fundamentals: a salary test cannot displace the duties test. Historically, the Department understood that such thresholds should be deliberately set low, as they were designed to only ‘screen[] out the obviously nonexempt employees.’”
The decision is great news for employers, as the rule had threatened to change the exemption status of millions of employees. However, the fight is not quite over.
Most anticipate the DOL will appeal to the Fifth Circuit Court of Appeals, which—despite its conservative reputation—recently denied a similar (but separate and distinct) challenge to the agency’s rulemaking authority on salary requirements for overtime exemptions. Stay tuned for further developments.
