Articles

Employment Law Update: Court Strikes Down 2024 Overtime Pay Regulations: What Employers Need To Know

On November 15, 2024, the Eastern District of Texas invalidated the newly established overtime pay regulations issued by the U.S. Department of Labor (DOL) in 2024. These regulations incrementally increased the minimum salary threshold for workers to qualify as exempt from $35,568 to $58,656 annually, implemented in two phases, and also implemented an “escalator” provision that would increase the minimum salary level every three years.

The initial phase of the rule, which took effect on July 1, 2024, increased the weekly salary from $684 to $844 (or $43,888 annual salary). The subsequent phase, scheduled for January 1, 2025, which would have increased the salary to $1,128 weekly (or $58,656 yearly) was enjoined by the court. The court not only nullified these increases, but it also invalidated the provision for automatic triennial adjustments to the salary threshold.

In doing so, the court opined that the DOL exceeded its statutory authority by enacting these regulations and disregarded the legal requirement that an employee's duties, in addition to their salary, are pertinent to overtime pay eligibility. The court found that the DOL lacked the authority to implement automatic increases because the DOL did not engage in the necessary notice-and-comment rulemaking process, which is a fundamental requirement under the Administrative Procedure Act (APA) for legal changes like this. This process ensures that stakeholders, including employers, employees, and other interested parties, have the opportunity to provide input and feedback on proposed regulations.

This judicial decision affects both workers and employers nationwide. While the DOL retains the option to appeal the decision, its prospects for success appear dim. The prevailing judicial climate, characterized by a conservative majority in the federal judiciary and a general skepticism towards expansive regulatory actions, especially in light of the recent Supreme Court Loper Bright decision, coupled with the stance of the incoming Trump administration, is not conducive to the DOL's regulatory agenda.

Employers should take immediate steps to review their current salary structures and ensure compliance with existing overtime pay regulations. Changes in current salaries need to be carefully considered and if implemented, must be done with proper advanced notice as may be required by state wage and hour laws (including in Maryland). Please consult legal counsel to understand the implications of the court's decision and to make any necessary adjustments to employee classifications and payroll practices.

---

The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.