by CUPA-HR | June 18, 2024
On July 1, the first phase of the U.S. Department of Labor (DOL)’s new overtime rule goes into effect. The initial phase of the rule will require employers to pay most white-collar employees a salary of at least $43,888. If employers fail to do so, those employees will be entitled to overtime pay under federal law. As the rule’s effective date approaches, opposition has mounted, with plaintiffs filing three lawsuits challenging the rule, including one filed by the state of Texas requesting that the court delay the July 1 effective date. Additionally, several Republican members of the U.S. House and Senate have introduced a Congressional Review Act (CRA) resolution aimed at blocking the rule.
Background
On April 23, 2024, DOL issued a final rule to amend the Fair Labor Standards Act (FLSA) overtime regulations. The FLSA requires employers to pay employees at least the minimum wage (currently $7.25) for each hour worked and 1.5 times the employee’s regular rate of pay for any hours worked over 40 in one week. However, the FLSA contains various exemptions to these overtime pay requirements, including one for white-collar employees. White-collar employees are considered “exempt” if they satisfy a three-part test: (1) the employee must be paid on a salary basis (that is, paid the same amount each week regardless of hours worked), (2) the employee’s salary must meet a minimum threshold (currently $35,568) established by DOL, and (3) the employee’s primary duties must be consistent with being an executive, administrative or professional employee. The final rule will increase the minimum salary threshold from $35,568 to $43,888 on July 1, 2024, and then to $58,656 on January 1, 2025. Thereafter, the rule requires automatic increases to the threshold every three years based on a set formula.
Lawsuits
On May 23, a group of 13 local and national associations and Texas businesses filed the first lawsuit in federal court in Texas challenging DOL’s rule. The suit claims that the salary threshold that goes into effect on January 1, 2025, is so high it will result in more than 4 million individuals being denied exempt status, even though these individuals could be reasonably classified as exempt based on their duties, and in doing so, the rule violates both the statutory language of the FLSA and prior court decisions. The suit also challenges the automatic updates.
On June 3, two additional lawsuits challenging the overtime final rule were filed by a software company in Texas, as well as the state of Texas itself. In both lawsuits, the plaintiffs make arguments similar to those in the lawsuit filed in May, stating that DOL lacks authority to implement the changes provided in the final rule. The state of Texas also filed a motion for a temporary restraining order (TRO) that seeks to block the final rule from going into effect on July 1.
While it may take the courts several months to issue decisions on the validity of the rule, the judge could decide whether to grant the state of Texas’s motion for a TRO before the July 1 effective date. The TRO would block the rule from going into effect until the court decides whether or not the rule is valid. More updates will be provided via CUPA-HR Washington Insider Alert emails as decisions are released.
Congressional Review Act Resolution
On June 3, Rep. Tim Walberg (R-MI) and Sen. Mike Braun (R-IN) introduced CRA resolutions in the House and Senate to block the overtime final rule from going into effect. Unlike traditional legislation, CRAs require only a simple majority in both chambers to pass (as compared to the usual 60-vote threshold to bypass a filibuster needed in the Senate).
Though House Republicans have the majority, it is unclear if and when the CRA will be brought to the floor for a vote, given the minimal concern with the July 1 effective date from the business community. In the Democrat-controlled Senate, the path for a floor vote seems even more uncertain as Senate Democrats do not appear to support the efforts to overturn the final rule. As such, it seems unlikely that Congress will pass the CRA to overturn the final rule this session.
CUPA-HR continues to monitor for and keep members apprised of any major updates relating to the FLSA overtime regulations.
