Last updated: November 8, 2024
On April 23, 2024, the U.S. Labor Department (DOL) published its final overtime rule that specifies that most employees earning less than $58,656 per year will soon be entitled to overtime compensation, regardless of whether they are currently classified as executive, administrative, or professional (white-collar) workers. The new salary threshold will be implemented in a two-step process, with the first phase increasing the salary threshold to $43,888 per year beginning on July 1, 2024, and the second phase increasing the salary threshold to $58,656 per year scheduled to begin on January 1, 2025.
However, it remains possible that a federal court could prevent or delay the second phase from taking effect. Here is the latest update on the status of the litigation challenging the overtime rule.
Three lawsuits challenging the legality of the overtime rule are pending in two federal courts in Texas. One of the courts held oral arguments in two of the cases (which were consolidated) on Friday, November 8, and the courts could issue rulings on these cases later this fall. The U.S. Supreme Court’s July decision in Loper Bright v. Raimondo that limits federal agencies’ regulatory authority (see the Center’s analysis of the Loper Bright case) increases the likelihood that the courts could stop the rule from taking effect or force DOL to modify it.
However, in September, the U.S. Court of Appeals for the Fifth Circuit ruled in Mayfield v. U.S. Department of Labor that DOL has the authority to set a salary threshold for FLSA exemption. The court considered Loper Bright as part of its analysis, but found that the language in FLSA granting DOL the authority to “define” and “delimit” the terms “administrative”, “executive”, and “professional” includes the authority to set a minimum salary threshold for exempt white-collar employees. This decision appears to undercut an assertion in a dissenting opinion from a 2023 U.S. Supreme Court case (Helix Energy Solutions Group v. Hewitt) in which Justices Brett Kavanaugh and Samuel Alito suggested that (even pre-Loper Bright) DOL may not have the authority to set a salary threshold for exempt employees.
The Mayfield case only upholds the 2019 DOL overtime rule, which had set the salary threshold at $35,656 per year. It does not address whether DOL had the authority to further increase the salary threshold to the current level of $43,888 per year or the future level of $58,656 per year. However, for now, the question for courts is not whether DOL has the authority to set a salary threshold (even in light of Loper Bright) but how high it may set that threshold.
The result of the presidential election increases the likelihood that a court decision could stop the January 1 increase in the salary threshold. If a court issues an injunction that stops the rule from taking effect, it is unlikely that DOL in the Trump Administration will defend the rule, effectively stopping it from taking effect. If the courts allow the January 1 increase in the salary threshold to take effect, it is unclear how DOL will enforce the new rule.