Professional Service Agreement

The DOL is Sued Over the 2024 New Overtime Rule

June 02, 2024

The first challenge to the Department of Labor's overtime rule has landed, but what the U.S. District Court for the Eastern District of Texas will do with it and how any decision will affect businesses remains up in the air. As this litigation develops, businesses must still prepare for the upcoming July 1, 2024, salary threshold increase.

Thirteen industry associations and businesses jointly filed a federal lawsuit challenging the Department of Labor's ("DOL") newly updated overtime exemption rule. In the lawsuit, plaintiffs assert the DOL unlawfully overstepped its authority by passing the new overtime rule. The plaintiffs liken the new rule to the 2016 Obama-era overtime rule, struck down by a federal court on grounds the increased salary thresholds effectively created a de facto salary-only test.

There is also a separate legal challenge is pending in the US Court of Appeals for the Fifth Circuit against the Trump-era overtime rule, which argues that the DOL doesn't have the authority to consider a worker's earnings at all when determining whether they are exempt from overtime.

The newly filed lawsuit acknowledges that if the Fifth Circuit were to find that the DOL cannot use salary levels as part of the overtime exemption test, then the rule should also be blocked.

Although the lawsuit has asked for expedited consideration, employers should continue to operate under the assumption that the DOL's overtime rule will go into effect starting July 1, 2024. To prepare for the upcoming salary threshold changes, employers should:

• Review current "white collar" exemption designations to not only ensure compliance with the FLSA exemptions.
• Review all exempt compensation levels to determine those that may fall under the worst-case scenario threshold of $ $43,888 per year. As of Jan. 1, 2025, the annual salary threshold will rise to $58,65 per year.
• Conduct a financial assessment (labor cost) of the impact of increasing salaries
• Should there be a conversion of any exempt employees to nonexempt, carefully strategize the tracking time, limiting work away from the office, financial impact of overtime, and most importantly, the communications process with those staff that may be affected.

In Summary
SESCO was founded in 1945 by an ex-Department of Labor, Wage-Hour Investigator. Our history is rooted in FLSA-Wage and Hour Accounting to include analyzing and applying the white-collar exemptions, assisting employers in understanding, and complying with the Act, representing employers before federal and state DOL's and in reviewing and designing effective compensation practices. Please contact SESCO as you have questions and certainly, we will alert our contacts on any developments.