DOL Rule Blocked as to One Employer, the State of Texas, Foreshadowing More Legal Challenges

The Department of Labor’s (“DOL”) Final Rule—which increased the wage thresholds for certain exemptions to minimum wage and overtime requirements under the Fair Labor Standards Act (“FLSA”)—went into effect on July 1, 2024. As set forth in our prior article, litigation challenging the Final Rule threatened to keep the Rule from going into effect—if a Court enjoined it earlier. To date, that has not happened.

Of note, however, is a development in one of those pending cases, filed by the Texas Attorney General. On June 28, 2024, a Texas federal judge granted the State of Texas a preliminary injunction prohibiting the Rule from taking effect as to its employees. That is, the injunction is limited to Texas State employees; this injunction does not affect private employers. However, the Court’s ruling will pave the way for more litigation, as the rationale for the Court’s holding could apply equally to private employers.

The Court found the Rule impermissible for basing overtime eligibility so heavily on salary that it fails to consider the other necessary element, job duties. While this holding could certainly apply to private employers, the Court noted it did not have before it any evidence about the injury to private employers. The State of Texas introduced evidence regarding its own harm but not that suffered by other employers, and so the Court limited its finding to the evidence before it, which was limited to the State of Texas.  Employers and other states will likely file additional lawsuits challenging the Rule in reliance on the reasoning of this decision.

In light of this continued uncertainty, employers should continue to make good faith efforts to adhere to the Final Rule in classifying employees and paying overtime. Details regarding the salary threshold changes can be found in our prior article.

If you have questions about the Final Rule or developments regarding its implementation, please contact your regular Thompson Coburn attorney.