Court Determines Salary Threshold Overrides Statutory Duties Test
United States District Judge Sean Jordan for the Eastern District of Texas issued a final summary judgment on November 15 invalidating the Department of Labor’s 2024 overtime rule. The judge determined the regulation exceeded statutory authority and ordered it vacated and set aside nationwide. The vacated rule sought to raise the minimum salary threshold required to exempt executive, administrative, and professional employees from federal overtime pay requirements to $58,656 annually by January 1, 2025. The ruling directly impacts an estimated 4 million salaried workers across the country.
The Department of Labor finalized the overtime regulation under the Fair Labor Standards Act in April 2024. The rule structured a two-phase increase to the white-collar salary exemption threshold. The first phase took effect on July 1, 2024, raising the required weekly salary from $684 to $844, equivalent to $43,888 annually. The second phase was scheduled to increase the threshold on January 1, 2025, to $1,128 per week, or $58,656 per year. In his memorandum opinion, Judge Jordan concluded that the agency’s dramatic salary increases displaced the primary legal standard.
The legal challenge was initiated by the State of Texas and more than a dozen national business organizations, including the National Retail Federation and the National Restaurant Association. The lawsuit also challenged the regulation’s automatic triennial updating mechanism; the thresholds were scheduled to adjust every three years starting July 1, 2027, without notice-and-comment rulemaking. Judge Jordan found that this automatic escalation provision violated the Administrative Procedure Act and vacated the regulation nationwide, invalidating both the January 2025 threshold and the July 2024 increase. The federal minimum salary threshold for white-collar overtime exemptions reverts to $684 per week, or $35,568 annually. The highly compensated employee exemption threshold likewise reverts from $151,164 to $107,432 per year.
