Federal Court Invalidates Department of Labor’s 2024 Overtime Rules

The United States District Court for the Eastern District of Texas has struck down the U.S. Department of Labor’s (DOL) final rules redefining which employees qualify as exempt from overtime pay under the executive, administrative, and professional (EAP) employee categories. The ruling applies nationwide, reverting the criteria for EAP employees to those in effect before the 2024 rule was adopted.

Overview of the 2024 Rule

The 2024 rule introduced three key changes to the EAP exemption under the Fair Labor Standards Act (FLSA), each involving increases to the minimum salary threshold for exemption.

1. July 1, 2024: The salary threshold increased from $684 per week to $844 per week.
2. Highly Compensated Employees (HCEs): Adjusted compensation rules were introduced.
3. January 1, 2025: A further increase to $1,128 per week was planned, alongside automatic salary adjustments every three years.

Court’s Decision

The court found the rule improperly emphasized salary over job duties, contrary to congressional intent. Specifically, the court ruled the $844-per-week threshold, effective July 1, 2024, as invalid, noting that it “rendered about one million employees nonexempt who were previously exempt, with no change in their duties.”

This decision also invalidated the planned January 2025 salary increase and the three-year automatic adjustment provision.

Implications for Employers

Effective immediately, as of November 15, 2024, the salary threshold for EAP exemptions reverts to the pre-2024 rule levels:

• EAP employees: $684 per week ($35,568 annually).
• Highly Compensated Employees: $107,432 annually.

The ruling raises unresolved questions about salary and overtime payments made between July 1 and November 15, 2024, under the now-invalidated rules. For example:

• Overtime payments: Employees newly classified as nonexempt may have received overtime pay they were not entitled to under the pre-2024 rules. Recovery of those amounts by employers is unlikely.
• Salary adjustments: Employers who raised salaries to maintain exempt status are unlikely to rescind those increases.

Employers are advised to consult legal counsel before making any changes to compensation or employee classification.

Impact on Future Rulemaking

The court’s decision casts doubt on the likelihood of an appeal. Observers believe the DOL, under the Trump administration, is unlikely to pursue a similar EAP rulemaking approach in the near term.

This decision does not affect states, such as New York and California, which maintain higher minimum salary thresholds for exemption than federal law requires.

ASTA responds

ASTA called the news a “significant legal victory” for its members and the whole industry. ASTA had strongly opposed the rule during the draft phase and submitted comments about what impact it could have on agencies.

In its submission, Senior Vice President & General Counsel, Peter Lobasso, also expressed doubt that DOL had “the statutory authority to affect… updates to the salary level outside of the notice-and-comment rulemaking process prescribed under the Administrative Procedure Act.”