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Update: The U.S. District Court for the Northern District of Texas on July 1 declined to block the new overtime rule nationwide. The ruling comes on the heels of the U.S. District Court for the Eastern District of Texas blocking the rule for the state of Texas as an employer in a separate lawsuit. The ruling clears the way for the July 1 increase of the salary threshold for the white-collar exemptions to the overtime rule to take effect for all employees except those working for the Texas state government.
We were alerted Friday afternoon there were two significant developments in the courts on Friday, June 28, 2024, which suggest that the rule may be subject to a nationwide injunction within the coming days. As of this writing, no court has ruled on these motions, however, actions may be imminent.
What To Do Next:
If you submitted any changes to your payroll provider, you need to determine if you would like the changes to remain in place or revert to the previous status/pay rate. Please keep in mind that if the DOL rules are upheld, you will need to make the necessary changes again to comply with the Department of Labor and FLSA.
Supreme Court Ruling:
First, on the morning of June 28, 2024, the U.S. Supreme Court published its decision in Loper Bright Enterprises v. Raimondo, in which the Court struck down a decades-old precedent of the federal courts (known as the “Chevron deference”) extending deference to federal agencies in their interpretation of otherwise vague or ambiguous language in the legislation Congress enabled them to enforce. This move by the Court in Loper Bright comes in the wake of a number of Court decisions in recent years that have struck down federal agency regulations on the basis that they exceed the authority granted to the agency by Congress. The decision in Loper Bright is expected to have far-reaching significance in limiting the bounds of federal agency action.
Later last Friday, following the Court’s decision in Loper Bright, a federal court in Texas ruled that State of Texas v. United States Department of Labor—while citing the Court’s opinion in Loper Bright—a lawsuit filed by the Texas Attorney General on behalf of the State of Texas as an employer, was likely to succeed on the merits in establishing that the DOL’s minimum salary rule exceeded the authority granted to the DOL under the FLSA, primarily because the agency’s action under the rule allowed salary alone to radically alter whether a worker could qualify for a white collar exemption under the FLSA, a statute that authorized the DOL to make rules regarding what sort of duties would be necessary to qualify for such an exemption without any direction to the DOL that salary levels should be a factor. On this basis, the Texas federal court issued an injunction against the rule, but limited the protections of that injunction solely to the State of Texas as an employer, itself. Nonetheless, other business groups with broader footprints than Texas have motions for a nationwide injunction pending (both with the same court and other courts) that seem just as likely to be granted as the Texas motion for the same legal reasons. Still, based on the court’s docket, no court has acted on those broader motions for injunction as of this Client Alert. Action on the motions seems imminent, however.
We will continue to keep you updated on the outcome of the court filings against this rule. If you have any questions or if you would like to discuss your current situation, please contact your BMSS professional at (833) CPA-BMSS or visit our website for contact information.