A federal court in Texas recently pulled the plug on a regulation that mandated a major increase in overtime pay eligibility beginning January 1. Finding the U.S. Department of Labor (DOL) had exceeded its executive authority, U.S. District Judge Sean Jordan struck down the 2024 rule in its entirety. 

Employees are typically owed time-and-half pay for working hours in excess of 40 hours in a week. However, executive, administrative, and professional (EAP) employees may be exempt if they perform specifically identified duties, are paid a salary rather than an hourly wage, and have a salary that meets a certain threshold amount.? 

While a 2019 rule had recently updated the salary threshold, the Biden administration in April finalized a new rulemaking that increased the minimum exempted EAP salary again on July 1 and then required another big boost starting on January 1. The Biden rule would then have made automatic updates every three years beginning July 2027. 

Judge Jordan, however, found the 2024 DOL rule to be an “unlawful exercise of agency power.” In a 62-page ruling, he explained that, though the salary threshold can be an appropriate screen for the overtime rule (consistent with another recent court ruling on this matter), it cannot effectively eliminate the law’s duties test. 

“In sum, because the EAP Exemption requires that an employee’s status turn on duties—not salary—and because the 2024 Rule’s changes make salary predominate over duties for millions of employees, the changes exceed the Department’s authority to define and delimit the relevant terms,” he wrote. 

Jordan had particular concern with DOL’s automatic indexing “shortcut,” which he said would unlawfully “abdicate from more frequent and thorough rulemaking efforts.”  

“As it turns out, the APA’s notice-and-comment provisions must be followed even when an agency finds them inconvenient,” he declared. 

Now that Judge Jordan vacated the entire 2024 overtime rule, including its July salary increase, DOL must decide its next steps. It could appeal the ruling to the U.S. Fifth Circuit Court of Appeals, but the upcoming change to a second Trump administration may affect those calculations. In addition, once the Trump team takes office in DOL, it is possible it will have its own thoughts on overtime, as it did when finalizing the salary threshold increase in the 2019 rule that is once again in effect. 

Regardless of what may or may not happen next in federal halls of power, now is an excellent opportunity for employers to examine and update their pay practices, ensure legal compliance, and address employment compensation matters. To help in this uncertain environment, ECFA updated in August our “Answering Your Overtime Questions” eBook in partnership with Sally Wagenmaker (Wagenmaker & Oberly), and organizations may also wish to revisit our June webinar on this matter that features insights from Ted Batson (CapinCrouse) and John Melcon (Sherman & Howard). Moreover, churches and ministries should consult with professional advisors regarding state law and other considerations specific to their own contexts. 

ECFA will continue to carefully monitor further overtime rule developments on Capitol Hill and in the courts.