A federal judge in Texas recently held the Department of Labor’s (DOL) rule increasing the annual salary threshold for the exemption provided for executive, professional and administrative employees (the “white-collar exemption”) outlined in the Fair Labor Standards Act (FLSA) is likely unlawful. For now, the federal judge’s order prevents the DOL from enforcing the new salary threshold, but, just in Texas.
Déjà Vu?
If you feel like you’ve seen this before, you are not alone.
This is not the first time a federal judge in Texas has been tasked with determining the legality of a salary threshold increase for exemptions for white-collar employees. In 2016, the U.S. District Court for the Eastern District of Texas (the “Eastern District”) – the same court currently reviewing the 2024 rule – permanently blocked a similar rule proposed by the DOL. The 2016 rule aimed to increase the salary threshold for the white-collar exemption from $23,660 to $47,476. Eventually, the DOL came back with a new rule in 2019 and successfully raised the salary threshold for the white-collar exemption from $23,660 to $35,568.
All versions of the DOL’s previous and current rules increase the salary threshold, but each version is unique. The 2016 rule attempted to set the salary threshold at the 40th percentile of weekly earnings of full-time salaried workers in the lowest wage region. The 2019 rule set the salary threshold at the 20th percentile of weekly earnings of full-time employees in the lowest wage region. Now, departing from its successful predecessor, the 2024 rule sets the salary threshold at the 35th percentile of weekly earnings of full-time salaried workers in the lowest wage region.
Although he acknowledged some differences, the federal judge in Texas – giving a shout out to Yogi Berra – acknowledged “this is déjà vu all over again.” That’s because the federal judge is not convinced the 2024 rule is anything other than an imitation of the 2016 rule.
What Now?
Instead of temporarily preventing the salary threshold from going into effect nationwide, the federal judge has only stopped the increase from taking effect in Texas. We may see challenges popping up in other states with organizations and employers raising the same or additional arguments in their hometowns. But, for right now, the hold on the DOL’s rule is just in Texas.
For employers and employees outside of Texas, the new salary threshold went into effect on July 1, 2024. The 2024 rule increases the salary threshold for the white-collar exemption from $35,568 to $43,888 (then to $58,656 effective January 1, 2025). Additionally, the 2024 rule increases the salary threshold for highly compensated employees from $107,432 to $132,964 (then to $151,164 effective January 1, 2025). Please see our previous blog post for more detail.
A lot is still up in the air, but as always, the Labor & Employment team is ready to assist with any questions or concerns you may have. We will continue to monitor developments, and provide updates on the status of the DOL’s rule and other employment laws.
*Toni Bernardi is a law clerk and not licensed to practice law.
