On Nov. 15, ABC applauded the decision of the U.S. District Court for the Eastern District of Texas, which set aside the U.S. Department of Labor’s controversial 2024 final rule, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees. The rule changed overtime regulations under the Fair Labor Standards Act.

The court found that the Biden-Harris DOL’s 2024 overtime rule’s July 1, 2024, increase was unlawful as well as the scheduled Jan. 1, 2025, increase. Specifically, DOL’s final rule increased the minimum annual salary level threshold for exemption to $43,888 on July 1, and on Jan. 1 it was scheduled to increase to $58,656. In addition, the threshold for highly compensated employees increased from the current level of $107,432 to $132,964 on July 1, 2024, and then to $151,164 on Jan. 1, 2025. In addition, salary thresholds would have been updated every three years starting on July 1, 2027.

As a result of this decision, the minimum salary threshold for exemption is once again set to $35,568, and the threshold for highly compensated employees is set to $107,432. In May, ABC joined a coalition of business groups in filing a complaint in the U.S. District Court for the Eastern District of Texas challenging the DOL’s overtime rule.

ABC immediately issued a news release applauding the decision:

“This decision is the correct one, and an important win for ABC members and the rest of the regulated community,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs. “It’s also no surprise. In 2017, this court permanently enjoined the DOL’s 2016 overtime rule on similar grounds, writing that the rule increased the minimum salary level threshold for exemption far beyond a level which the DOL is permitted to adopt. The court also found unlawful the automatic indexing provision in the new rule that would have further increased the salary threshold without the notice-and-comment rulemaking required by the Administrative Procedure Act.

“Some ABC members employ workers who would have lost their exempt status as of Jan. 1 because of the 2024 overtime rule’s scheduled increase,” said Brubeck. “This would have disrupted the construction industry, specifically harming small businesses, restricting employee workplace flexibility in setting schedules and hours, and hurting career advancement opportunities.          

“The 2024 rule’s radical increase in the salary threshold for exemption would have also further complicated the current economic outlook,” said Brubeck. “Multiple industries, like construction, are grappling with uncertain economic conditions such as high interest rates, supply chain disruptions, materials price inflation and workforce shortages, all of which push operational costs ever higher. Specifically, ABC estimates that the construction industry must hire more than half a million additional workers in 2024 to meet demand. The rule’s triennial automatic indexing provision would have exacerbated its harmful impact on businesses and added to rampant inflation that is already harming the economy as a whole.”

ABC’s general counsel, Littler Mendelson, published an article discussing the court decision and what comes next:

“It is clear now that the Jan. 1, 2025 increase will not go into effect as scheduled, and as a matter of law, the July 1, 2024 increase is nullified. Employers that previously adjusted the salaries or exemption status of employees who earned less than the salary threshold set by the now-invalidated July 1 increase are advised to consult with counsel before considering whether to rescind those changes on a going-forward basis. Employers should also remain aware that some states have salary thresholds that exceed the FLSA threshold, including Alaska, California, Colorado, Maine, New York, and Washington. 

“The DOL may seek to appeal the lower court’s decision to the Fifth Circuit Court of Appeals. That said, with the upcoming change in presidential administration, we predict that under new leadership the DOL would likely abandon any appeal and allow the lower court’s decision to stand. Going forward, it is less clear whether the Trump administration will revisit some or all of the rule, repealing it entirely, or perhaps adopting a different formulation.”

Continue to monitor ABC’s Newsline for future updates.