On May 21, business organizations filed a lawsuit against the U.S. Department of Labor (DOL) in a federal district court located in Texas, alleging the agency had overreached itself in enforcing the overtime rule and the Fair Labor Standards Act (FLSA). The Administrative Procedure Act (APA) was allegedly broken by the rule, according to the lawsuit.
The Two Phases of the Rule
The DOL's new overtime regulation will be implemented in two phases, with an increase in the income level on July 1 and another on January 1, 2025. This will provide employers flexibility in determining how much to pay their exempt workers.
The annual wage threshold under the Fair Labor Standards Act (FLSA) for white-collar workers free from overtime obligations will rise from $35,568 to $43,888 as of July 1. The yearly income requirement will increase to $58,656 on January 1, 2025.
A three-year automatic adjustment mechanism for upgrading the wage threshold is also included in the final rule.
Same Old Story
The latest case was submitted to the same Texas court that invalidated an Obama administration overtime regulation that aimed to increase the wage cap to $47,476. Judge Amos Mazzant concluded in that 2017 opinion that the DOL rule no longer took into account an employee's job tasks when determining whether or not they were exempt from overtime because it placed too much emphasis on a worker's pay level.
The new rule, according to the lawsuit, disregards that earlier decision. The National Retail Federation, the Associated Builders and Contractors, and the American Hotel, and Lodging Association are among the business organizations suing over the rule.
The lawsuit further claims that the automatic, triennial adjustments to the salary criteria would be in violation of the APA's notice and comment requirements.
Back Again
"We are back before this court because the department has done it again," the plaintiffs stated in their case. The department has released yet another rule that directly violates the previous order from this court. It includes an unlawful triennial "escalator" provision and raises the minimum salary for the EAP [executive, administrative, and professional] exemption far above the amount that the DOL is allowed to adopt.
The plaintiffs claimed that the 2024 regulation will illegally use an employee's remuneration rather than their job tasks to determine whether or not an employee with an EAP capability is exempt from paying overtime.
Sharp Rise in 2025
Based on data from the U.S. Bureau of Labor Statistics, the salary threshold update, which takes effect on January 1, 2025, is $1,128 per week. This represents the 35th percentile of weekly earnings of full-time paid workers in the lowest-wage U.S. Census region, which is currently the South. According to Natalie Bare, an attorney at Duane Morris in Philadelphia, the DOL during the Obama administration attempted to set the baseline minimum salary threshold for the white-collar exemptions at the 40th percentile in 2016.
In contrast, the Trump administration established the standard minimum wage at the 20th percentile, leading to the current pay level test of $684 weekly ($35,568 annually), which serves as the basis for the first upgrade to $844 that takes effect on July 1st, according to her.
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