Texas District Court Blocks New Overtime Provisions for Texas Government Employees

Previously, WorkWise Compliance (formerly Personnel Concepts) reported that lawsuits were filed to block the Department of Labor’s (DOL’s) new overtime provisions. Specifically, on May 22nd, 2024, more than a dozen business groups and a company filed a lawsuit to block the DOL’s new overtime rule. The lawsuit, Plano Chamber of Commerce v. U.S. Department of Labor, was filed in the U.S. District Court for the Eastern District of Texas. Specifically, the plaintiffs argued that the DOL “acted arbitrarily, capriciously, and otherwise not in accordance with the law.” Additionally, the State of Texas (in State of Texas v. U.S. Dep’t of Labor) filed suit trying to stop the new overtime rule from taking place.

Final Overtime Provisions Rule

As the nation’s primary wage law and one of the major employment laws employers must follow, the Fair Labor Standards Act (FLSA) establishes minimum wage and overtime protections for non-exempt part-time and full-time employees. However, under section 13(a)(1) of the FLSA, employees paid above the FLSA’s current salary basis are generally exempt from overtime provisions. To qualify for overtime exemption, employees must have been paid on a salary basis at not less than $684 per week. These exempt employees must also perform at least one of the duties of an executive, administrative, or professional employee. Explicitly, the DOL’s final rule increased the salary threshold for overtime exemption under the FLSA to $844 per week ($43,888 per year). This means that salaried employees who earn less than $43,888 a year are eligible for overtime pay. Indeed, the DOL seeks to extend overtime protections to millions of low-paid salaried employees. According to the DOL, many of these low-paid salaried employees work alongside hourly employees and do the same tasks. Like their hourly counterparts, they often work over 40 hours in a workweek. However, they do not receive an overtime rate for those hours. Correspondingly, the rule’s effective date was July 1st, 2024. On January 1st, 2025, the overtime threshold will increase to $1,128 per week ($58,656 annually). Finally, the overtime threshold for highly compensated employees (HCEs) will also change. Beginning on July 1st, 2024, the annual compensation level for HCEs to be exempt from overtime pay increased from $107,432 to $132,964. On January 1st, 2025, that level will rise to $151,164. Future updates to the salary and compensation levels will occur every three years. Those updates will apply updated wage data to the regulations. The next three-year update will take place on July 1st, 2027.

Texas District Court Ruling

On June 28th, 2024, a federal judge in Texas ruled that the DOL likely exceeded its authority in implementing its final overtime provisions rule. The decision, however, only applies to Texas government employees. This was because the “State of Texas” was the only plaintiff in that case. Explicitly, the judge declined to issue a nationwide stay on the new rule. As noted earlier, however, similar pending challenges filed by various Texas businesses remain. These rulings could affect many more employers than just Texas government agencies. Until any decisions are made, however, employers should still try to comply with the new overtime rule as directed by the DOL.

Employer Takeaways

In conclusion, as of this blog’s publication date, a handful of cases seek to stop implementing the new overtime provisions. However, employers will still need to follow the previous 2020 rule if the new overtime rule is overturned entirely. To help business owners and their managers comply with overtime exemption laws, WorkWise Compliance created the Overtime Exemptions Compliance Program eLearning Module. This digital solution helps employers, managers, and human resources representatives understand the Department of Labor’s (DOL’s) overtime rule requirements and determine if employees need re-classification.