Employer Associations Sue to Block DOL’s New Overtime Rule

By: Andrew Broadaway 

Although many of our clients are already preparing to implement workforce changes to satisfy the Department of Labor’s new adjustments to the Salary Basis threshold, a new lawsuit was just filed seeking to block the DOL’s Final Rule.  Does anyone have déjà vu?  We sure do.

What’s going on with the new Final Rule?

On May 22, 2024, a coalition of employer groups and business associations filed a lawsuit in the Eastern District of Texas—the same court that, in 2017 blocked the DOL’s previous effort at raising the salary threshold—seeking again to stop the Salary Threshold changes from going into effect in July.  This plaintiff group has raised largely the same challenges that the court found persuasive back in 2017.

As many recall, in 2016 the DOL issued a similar rule that would have increased the minimum salary level for executive, administrative, or professional (“EAP”) exemption from $23,660 to $47,476; the 2016 Rule also featured an automatically increasing salary level every three years. The federal court in the Eastern District of Texas issued an injunction that effectively blocked the 2016 Rule from going into effect just prior to its effective date (and after many employers had already implemented the changes mandated by the Rule).

Now, the 2024 Rule (which raises the EAP salary level to $43,888 on July 1, 2024 and $58,656 on January 1, 2025 and also has a triennial increase provision) is being challenged on similar grounds to those successful in 2017. The plaintiff group argues that “the Department’s 2024 Overtime Rule largely repeats the errors of the 2016 Rule and fails to address the flaws previously identified by this Court. The Department’s new EAP salary thresholds far exceed the limits of the statutory authority.” The plaintiffs further allege that “the 2024 Rule includes an unlawful automatic indexing provision that will further increase the EAP minimum salary threshold without … notice-and-comment rulemaking.”  The DOL has not yet responded.

Will the Final Rule go into effect? What should employers do?

At this point, no one knows. It is presumed that the plaintiff groups will seek an injunction blocking the Rule from going into effect on July 1, 2024.  So far, no briefing schedule has been set and it is unknown if the court will act prior to that date.  We will be monitoring the situation closely and recommend that our clients do as well.  At this point, because it is not certain if the Final Rule will become effective, the best course of action is to continue to analyze your workforce and payroll and plan to implement the required changes—but consider holding off announcing any plans until closer to the effective date.  It is important to identify the employees in your organization that the Final Rule may impact and be prepared to adjust accordingly. We will be available to assist and counsel you in this developing area.