Department of Labor Overtime Rule Becomes Effective!

The Department of Labor’s (“DOL”) Final Rule increasing the salary level for exempt positions and increasing the number of employees eligible for overtime goes into effect today, July 1, 2024, for all 50 states, with the exception of the state of Texas as an employer. The Overtime Rule does apply to private employers in Texas. On Friday, June 28, 2024, the U.S. District Court for the Eastern District of Texas granted the state of Texas’s request for injunction as an employer regarding the implementation of the new overtime rule. However, the emergency relief is limited only to the state of Texas as an employer. No other Court has issued injunctive relief with respect to the Final Rule’s application and effective date of July 1, 2024.

According to the Court’s ruling, Texas submitted evidence to support all factors that would favor the granting of preliminary injunction on its behalf. “In sum, Texas has established that all factors weigh in favor of granting a preliminary injunction,” Judge Sean D. Jordan wrote. “Texas is likely to succeed in showing that the 2024 Rule is an unlawful exercise of power, Texas will be irreparably harmed absent an injunction, and the balance of equities and the public interest favor preventing unlawful agency action.”

This means that as of today, workers making less than $43,888 are automatically eligible for overtime pay any time they work more than 40 hours per week. Clients should therefore ensure that they have identified those individuals who are currently exempt that make less than the $43,888, and require those individuals to begin tracking their time in compliance with the DOL’s wage and hour requirements.

There is still a second case pending in the Northern District of Texas and a third case in the federal court of Pennsylvania. Given the limited injunction the Texas District Court entered, it is likely other interested parties may file additional lawsuits requesting injunctive relief on behalf of the entire United States. The U.S. Supreme Court’s decision last week in Loper Bright Enterprises v. Raimondo and Relentless Inc. v. Department of Commerce overruled a 1984 decision that held courts should defer to federal agencies’ reasonable interpretations of ambiguous laws passed by the United States Congress. That decision was cited in the Texas court decision, and will likely be cited by others challenging the Final Overtime Rule.

New information will be updated as it becomes available. However, businesses should begin compliance with the Final Rule immediately.