Texas Federal Court Delays Effective Date of the DOL’s New Overtime Rule as Applied to Texas as an Employer

Quick Hits

• A federal court in the Eastern District of Texas granted the state of Texas’s request for a preliminary injunction to block the DOL’s new rule raising the salary thresholds for the white-collar exemptions.
• The order is limited to enjoining enforcement of the rule against the state of Texas as an employer.

The court granted a preliminary injunction to block the 2024 DOL rule requested by the state of Texas and consolidated another challenge to the rule filed by more than a dozen business groups. The court found that the state is likely to succeed in proving the rule exceeds the DOL’s authority under the Administrative Procedure Act (APA) because the FLSA’s executive, administrative, or professional (EAP) exemption is based on employees’ salary and not their job duties.

Notably, the court relied upon the analytical pronouncements set forth in the Supreme Court of the United States decision issued earlier the same day in Loper Bright Enterprises v. Raimondo, which overruled the 40-year-old Chevron deference framework in which courts deferred to federal agencies reasonable interpretations of the federal laws they enforce.

“In sum, since the EAP Exemption requires that exemption status turn on duties—not salary—and the 2024 Rule’s changes make salary predominate over duties for millions of employees, the changes exceed the authority delegated by Congress to define and delimit the relevant terms,” the court stated. “Therefore, these changes to the minimum salary level are likely “in excess of statutory jurisdiction.”

In granting the preliminary injunction, the court noted the facts that the July 1, 2024, minimum salary increase will make one million employees across the country non-exempt and make another three million non-exempt after the January 1, 2025. Although Texas sought a nationwide injunction, the court limited the relief to Texas as an employer.

The 2024 DOL rule will, on July 1, 2024, raise the minimum weekly salary to qualify for the EAP exemption from $684 per week to $844 per week or the equivalent salary of $43,888 per year. The threshold will then increase to $1,128 per week, the equivalent of a $58,656 annual salary on January 1, 2025. Under the rule, that threshold will increase every three years based on up-to-date wage data.

The Texas lawsuit is one of three federal court challenges to the DOL final rule, including another one filed in the Eastern District of Texas by more than a dozen business groups led by the Plano Chamber of Commerce. In addition to the preliminary injunction, the court in the Texas case consolidated those two lawsuits. A third challenge was filed by software company Flint Avenue LLC in the Northern District of Texas. Flint Avenue moved for a nationwide preliminary injunction in that case on June 12, 2024. No decision has been issued.

Next Steps

The ruling means that the DOL will be blocked from enforcing the rule against the state of Texas as an employer. However, the decision raises broader questions about the DOL rule and its authority to set salary thresholds for the white-collar overtime exemption.

Ogletree Deakins’ Wage and Hour Practice Group will continue to monitor developments and will provide updates on the Wage and Hour blog as additional information becomes available.

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