Overtime Final Rule
Texas v. Department of Labor
Date: June 28, 2024
Issue: Whether the Department of Labor’s (DOL) overtime final rule exceeds its authority under the Fair Labor Standards Act (FLSA).
Case Summary: A Texas federal court issued a preliminary injunction partially blocking the DOL’s overtime final rule.
The rule increased the salary level below which an employee is automatically subject to the Fair Labor Standards Act’s overtime and minimum wage requirements. As of July 1, the existing $35,568 salary level increased to $43,888. Therefore, if a bank has exempt employees who make between $35,568 and $43,888, the bank will need to reclassify the employee as nonexempt—and thus subject to federal overtime and minimum wage requirements—or increase the employee’s salary to $43,888.
The state of Texas sued DOL challenging the rule, and the court blocked enforcement against the state of Texas (as an employer) only. Relatedly, a group of nonfinancial trade associations filed a separate lawsuit challenging the rule. The court did not rule on that lawsuit, which had not sought a preliminary injunction to enjoin the July 1 salary increase. Consequently, unless there is further judicial action, the 2024 rule takes effect on July 1 with respect to all private employers, including banks.
In its ruling, the court concluded Texas’s challenge met the requirements for issuance of a preliminary injunction, in that the rule is “likely unlawful and Texas is likely to succeed on the merits” of its challenge. The court concluded the proper inquiry into whether someone works in an executive, administrative, or professional capacity—the three exemptions at issue—“must turn on that person’s function and duties.” The mention of salary in the statutory text describing the exemptions is “glaringly absent.” Therefore, any rule defining the scope of the exemptions must “center on duties” of employees, but the rule would change the status of millions of employees without considering the employees’ duties. The court held that DOL’s changes to the minimum salary level are “likely in excess” of the department’s statutory jurisdiction.
Bottom Line: A decision on the trade associations’ lawsuit is expected before the next salary level increase, which would occur on Jan. 1, 2025. At that time, if the rule is not enjoined, the salary level would increase to $58,656 under the rule.
Document: Preliminary injunction
