In November, a Texas federal court struck down the Biden Department of Labor’s (DOL) rule that would have made millions of salaried workers eligible for overtime pay.
Our Firm wrote about the rule earlier this year before it took effect on July 1, 2024. The rule substantially raised the salary threshold for overtime exemption under the Fair Labor Standards Act (FLSA). The Rule also indexed the salary threshold to inflation and mandated that the salary floor would automatically raise every three years.
The State of Texas and a number of private groups challenged the rule in the Eastern District of Texas. The gist of their challenge was that, even though the FLSA grounds overtime exemptions in an employee’s “duties,” the Biden DOL’s rule raised the minimum salary threshold by such a degree that an employee’s duties would become irrelevant. As our Firm covered previously after the district court preliminarily enjoined the rule in the Texas action, that action was consolidated with the private groups’ challenge—captioned Texas v. DOL—and all parties proceeded to brief cross‑motions for summary judgment.
On November 15, 2024, the district court granted the challengers’ motions for summary judgment and “set aside” the rule nationwide on two bases. First, the court accepted the challengers’ primary argument that DOL had exceeded its statutory authority by raising salary thresholds to an extent that effectively nullified the statutory “duties” test for overtime exemptions. This holding required the court to thread the needle because, just two months earlier, the Fifth Circuit, in Mayfield v. DOL, upheld the DOL’s authority to set minimum salary thresholds in the first place. The district court relied on the Mayfield court’s statement that the DOL’s authority does not permit “enact[ing] rules that replace or swallow” the FLSA’s “duties” test. Second, the district court held that the rule violated the rulemaking provisions of the Administrative Procedures Act (APA). The court reasoned that each automatic increase of the salary threshold would constitute a new “rule” under the APA but would circumvent the required notice-and-comment process.
It is uncertain whether the DOL will pursue an appeal under the incoming Trump administration. But if so, the Fifth Circuit—which would historically have been viewed as a favorable venue for the challengers—will have to determine if the Texas district court was faithful to the Mayfield decision.
