July 8, 2024 – On June 28, 2024, the U.S. District Court for the Eastern District of Texas granted a preliminary injunction to block the April 2024 Final Rule by the U.S. Department of Labor (DOL) aimed at increasing the minimum salary thresholds for the FLSA “white-collar” overtime exemption. The preliminary injunction only applies to Texas as a state employer.

FLSA generally requires an employer to pay an employee time-and-a-half (“overtime”) if the employee works more than 40 hours in a week, unless an exemption is applicable. To qualify for a “white-collar” or executive, administrative, or professional (EAP) exemption, the employee must satisfy the job duties test of the applicable exemption and be paid at least the minimum weekly salary. The DOL’s rule focuses on raising the minimum salary level for EAP exempted employees and the total annual compensation level for the highly compensated employee exemption. The State of Texas claims that DOL’s rule is unlawful because by creating a “de facto salary only” test, the DOL has breached the Administrative Procedure Act (APA) and the U.S. Constitution.

The Eastern District of Texas found that the state was likely to succeed on the merits, holding that the increased threshold effectively eliminated the duties test, and thus, was entitled to injunctive relief. As a result, the Court found that the DOL exceeded their authority because Congress only granted DOL the ability to “define and delimit” the scope of the EAP exemptions and to modify their criteria “from time to time by regulations.” Notably, the injunction is limited to the State of Texas in its role as an employer of state employees, and all other employers (in Texas and across the U.S.) are currently subject to the rule. Thus, all other employers are facing the enforcement of the DOL’s rule with the first raise which came into effect on July 1, 2024, and the second raise beginning on January 1, 2025.

While the future of the DOL’s rule is uncertain, this holding may signal a similar future decision on the DOL’s final rule, considering that one other challenge to the rule remains which could result in a nationwide injunction. Nonetheless, at this point employers are advised to proceed at their own risk, assuming that the other request for injunction, if granted at all, will now be issued after the fact of the rule taking effect.