As expected, a federal court in Texas has thrown out regulations issued by the U.S. Department of Labor increasing the salary levels necessary for white‑collar workers to be exempt from overtime compensation.
As most employers are aware, white‑collar workers (referred to in the law as “executive, administrative, and professional” employees) can be exempt from overtime compensation if they perform exempt duties and are paid on a salary basis. Since 2019 the salary threshold for exempt status has been $684 per week ($35,568 annually). Workers who are paid less than that generally are eligible for overtime, regardless of their actual job duties. Workers whose salaries exceed that threshold may be exempt from overtime if they also perform exempt job functions (such as managerial/supervisory, administrative, or professional functions).
Earlier this year the Biden administration published regulations increasing that threshold figure to $844 per week ($43,888 annually) effective July 1. The regulations also would have increased the figure again, effective January 1, to $1,128 per week ($58,656 annually). The regulations also would have implemented automatic further increases in the salary threshold beginning in 2027. The result of the regulations would have been to significantly expand the number of American workers eligible for overtime compensation.
The state of Texas and a bloc of business groups sued the DOL, arguing that the regulations exceeded the agency’s legal authority (Texas v. U.S. Department of Labor). In June the court granted Texas’s motion to preclude the regulations from being enforced against the state. In a lengthy opinion issued November 15, the court agreed with the state and the business groups that the regulations exceeded the DOL’s legal authority in all respects, and “vacated” the regulations in their entirety, nationwide and as against all employers, effective immediately.
The result of the court’s decision is that the 2019 salary threshold ($684 per week, or $35,568 annually), will remain in place until further notice. The DOL could conceivably appeal Friday’s ruling, but the forthcoming change in administration in January makes that unlikely. Meanwhile, the new administration could issue new regulations further addressing the salary threshold issue, perhaps even reducing the threshold. But any such action would be subject to the normal regulatory process (advance public notice of proposed changes in regulations, opportunity for public comment, and additional advance notice before final rules become effective).
We encourage employers who have specific questions about the Fair Labor Standards Act (or any employment law topics) to contact the author or any member of Gallagher & Kennedy’s Employment & Labor Law practice.
about the author
Don Johnsen represents employers in matters involving employment discrimination and sexual harassment, wrongful discharge, breach of contract, wage and hour disputes, arbitrations, and labor practice charges. Practicing employment and labor law exclusively, he advises on employee hiring, discipline and discharge procedures, drug and alcohol testing, non-competition matters, labor relations issues, and other employment-related policies and procedures.