Texas Federal Court Invalidates Overtime Rule

Late last week, a Texas federal court judge struck down the Obama-era overtime rule that would have extended overtime pay to millions of workers.

In 2016, the Department of Labor (DOL) passed a final rule to increase the minimum salary required for employees to qualify as exempt from receiving overtime. By raising the annual salary requirement from $23,660 to $47,476, the DOL estimated that 4.2 million employees would become eligible to receive overtime pay. However, several states and business groups filed legal challenges in court to block the rule from taking effect. In November of 2016, a federal court judge in Texas delayed the rule from taking effect until it could be reviewed and decided upon.

Last week, the same judge ruled that the DOL overstepped its legal authority by raising the salary threshold so high. To be exempt from overtime, an employee must not only earn the minimum salary, he or she must also perform certain types of work—for example, executive, administrative, or professional work. (To learn more, see our article on the white-collar exemptions.) The judge held that the DOL’s rule placed too much importance on a worker’s salary rather than his or her job duties, effectively weeding out millions of workers based on salary alone.

Signs point to the DOL considering a new rule that would create a minimum salary that is higher than the current threshold of $23,660, but lower than $47,476. The Department of Labor has already issued a request for information so that it can seek input from the public on the matter. This is typically the first step in the rulemaking process. While it’s unclear what the new threshold will be, it will likely be a much more modest increase. Earlier this year, Labor Secretary Alexander Acosta stated that he would support a salary threshold around $33,000.