Overtime Dreams Shattered FLSA Salary Threshold Will Remain the Same After Texas v US Dept of Labor Ruling
In April 2024, the Department of Labor announced a new rule for overtime that aimed to qualify millions of employees for overtime pay by increasing the Federal Labor Standards Act (FLSA) salary threshold. What this means is that employees have to make more money per week to justify an employer contending that the employee should not get overtime pay if they work over 40 hours a week. The rule notes that the first increase was to take effect on July 1, 2024, raising the FLSA threshold to $43,888 annually ($844/weekly). The second increase was planned for January 1, 2025, raising the FLSA to $58,656 annually ($1,128/weekly). In addition to the proposed changes to the salary threshold, the DOL rule sought to adjust the annual compensation requirement for highly compensated employees from $107,432 to $132,964.
However, this was not meant to be.
On November 15, 2024, a federal court in Texas ruled[1] that the Department of Labor (DOL) overstepped its authority with its new overtime rule, effectively voiding the changes that were set to take place on July 1, 2024. The State of Texas argued that the DOL exceeded the scope of their authority by including provisions such as the annual increases in salary thresholds for the subsequent three years. The State of Texas also claimed that the DOL’s rule prioritized salary levels over job duties when defining exemptions for the executive, administrative, and professional employees. Lastly, the State of Texas emphasized the potential impact of this rule on small businesses, arguing that the increase in salary threshold would impose an undue burden on employers.
Ultimately, the court sided with the State of Texas, determining that the DOL exceeded their authority when it implemented the automatic salary threshold increases without clear congressional authorization and focusing too narrowly on salary levels.
This decision has significant implications for both employers and employees across the United States. The court's ruling means that the FLSA salary threshold will remain at $35,568 annually. Additionally, the ruling means that the planned increases over the next few years will not occur. For employers, this decision brings a certain degree of relief, as they will not have to worry about salary changes and overtime pay.
But for employees, the ruling means that fewer workers will qualify for overtime pay, as the threshold for exemption remains lower than what the DOL had proposed. This could result in fewer employees receiving overtime compensation for hours worked beyond the standard 40-hour workweek.
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The court’s decision highlights the continuing struggle between balancing regulatory constraints with fair labor standards. Although the decision provides potential stability for employers, it also highlights the need for continued dialogue on how best to protect workers' rights without imposing undue burdens on businesses.
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