A federal judge in Texas has issued an injunction preventing the Department of Labor (DOL) from enforcing its Final Rule that raises the minimum salary level requirements for executive, administrative, and professional (EAP) exemptions to the minimum wage and overtime requirements under the Fair Labor Standards Act (FLSA). The case, State of Texas v. U.S. Dep’t of Labor, No. 4:24-cv-499-SDJ (E.D. Tex. June 28, 2024), specifically blocks the DOL from enforcing the increase for Texas government employees. However, the injunction does not apply nationwide.
New Salary Thresholds Effective July 1
As of July 1, the standard EAP salary threshold increases to $844 per week ($43,888 annually) for all other FLSA-covered employers, including private employers in Texas. This marks the first phase in a planned overall 65 percent increase to the minimum salary requirements. Additionally, the simplified exemption test for highly compensated employees rises to $132,964 annually.
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Legal Context and Chevron Doctrine Overruled
The court’s decision is significant as it is the first to find a federal rule unlawful following the U.S. Supreme Court’s June 28, 2024, decision in Loper Bright Enters. v. Raimondo, which overturned the “Chevron doctrine” of deference to federal agencies.
Injunction Specific to Texas Government Employees
District Judge Sean Jordan granted the injunction to the State of Texas, the sole plaintiff in the lawsuit challenging the Final Rule. Judge Jordan’s opinion emphasized that the EAP exemptions should be based on an employee’s duties rather than their salary. He argued that the DOL’s imposition of a salary minimum for the EAP exemptions is unlawful.
Implications for Other Pending Cases
This ruling could signal similar outcomes in other pending cases. Various plaintiffs argue that the DOL lacks statutory authority to raise the minimum salary level for the EAP exemptions and that the FLSA defines these exemptions based on duties performed by employees.
Other Legal Challenges
The State of Texas filed its lawsuit on June 3. Additionally, a coalition of business groups filed a lawsuit in the same district court (Plano Chamber of Commerce v. U.S. Dep’t of Labor) but did not seek a preliminary injunction. Another lawsuit challenging the DOL’s Final Rule is pending in the Northern District of Texas. In this case, Flint Avenue, LLC v. U.S. Dep’t of Labor, a small business argues that their exempt employees will lose their exemptions under the new salary floor.
Ongoing Litigation
Litigation challenging the current salary threshold is also pending in the U.S. Court of Appeals for the Fifth Circuit. In Mayfield v. U.S. Department of Labor, the Western District of Texas upheld the DOL’s authority to impose a minimum salary requirement. The Fifth Circuit will hear oral arguments on August 7.
Historical Context and Future Outlook
Judge Jordan’s decision draws parallels with a 2016 case, State of Nevada v. U.S. Dep’t of Labor, where the court blocked a similar increase to the EAP salary floor. The court ruled that the salary threshold effectively nullified the duties test.
Employer Guidance
Employers, except for those in the State of Texas, must comply with the new minimum salary floor. They should raise the salaries of exempt employees who fall below the new threshold, reclassify those employees as nonexempt, or limit their working hours to avoid overtime.
Judge Jordan aims to resolve the case on its merits within months, likely before the next phase of the salary increase on January 1, 2025. This future increase will raise the threshold to $1,128 per week ($58,656 annually) and the highly compensated employee floor to $151,164. An intervening decision from the Fifth Circuit could potentially halt these increases altogether.
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