FLSA Injunction

1 week ago

As noted previously on the Southwestern HR Consulting website, the Feds have increased the exemption threshold for purposes of overtime effective July 1, 2024, with a second increase on January 1, 2025, and potential increases every three years. Specifically, the first two increases are:

July 1, 2024: $844 per week ($43,888 per year)
Jan. 1, 2025: $1,128 per week ($58,656 per year)

Since then (June 3, 2024) a complaint requesting an injunction has been filed in the US District Court in Texas against the new Final Rule related to exemption from overtime pay. The complaint states that according to the Feds 1 million currently exempt employees will lose their exemption status on July 1, 2024, and 3 million exempt employees will lose exemption status with the increase in threshold on January 2025, regardless of being classified in a “bona fide executive, administrative, or professional capacity.”

The Texas Attorney General, Paxton makes several arguments including stating that the Rule is arbitrary and capricious. Citing the Chevron Doctrine, which addresses court reviews of agency actions, the complaint states that a determination on exemption should include the employees’ duties instead of just salary to determine an employee’s exclusion from the executive, administrative or professional exemptions. Paxton cites a prior court ruling on a previous 2016 proposed rule on exemption thresholds which states that the rule “would exclude so many employees who perform exempt duties, [which shows that Defendants] failed[ed] to carry out Congress’s unambiguous intent. Thus, the Final Rule does not meet Chevron step one and is unlawful.” The complaint also states that the “automatic updating mechanism in the 2016 Rule was unlawful.” Paxton also states that the DOL did not appeal the Court ruling which “invalidated the 2016 Rules automatic updating mechanism” and that the DOL, instead, issued a different rule in 2019 with a lower exemption threshold than what was originally proposed in 2016.

The complaint adds that the Fifth Circuit is also currently hearing a case regarding the requirement of minimum salary requirements to qualify for the duties exemption.

What does this mean?

It is suggested that action not be taken until July 1 to prevent unnecessary changes should the court rule in favor of the injunction. However, employers should plan on the Final Rule taking effect on July 1, 2024, absent injunctive relief.

These changes are sweeping and there are many implications to your business that need to be considered before you decide whether to increase your salaries or have your employees’ designation revert from exempt to non-exempt. We are currently discussing what those changes mean with our clients so they can make the best decision for their business. If you need Human Resources expertise on this item or others, we can help you at Southwestern HR Consulting (SWHRC). Contact SWHRC today at the link above to talk to find out about our services and our team of experts.